Environmental, Social & Governance Compliance

Environmental, social and governance (ESG) refers to a collection of corporate performance evaluation criteria that assess the robustness of a company’s governance mechanisms and its ability to effectively manage its environmental and social impacts. It also provides a way to measure business risks and opportunities in those areas

The role of an ESG program is to ensure accountability and the implementation of systems and processes to manage a company’s impact, such as its carbon footprint and how it treats employees, suppliers and other stakeholders. ESG initiatives also contribute to broader business sustainability efforts that aim to position companies for long-term success based on responsible corporate management and business strategies.

3 Pillars of ESG

Environmental

Social

Governance

As the number of ESG funds for managing investments rises, business and IT leaders in companies increasingly are paying attention to ESG as a functional approach to doing business. Each aspect of ESG plays an important role in the effort to increase a company’s focus on sustainable and ethical practices. Here are details on common ESG criteria used by companies and investors.

Environmental

Environmental factors involve considerations of an organization’s overall impact on the environment and the potential risks and opportunities it faces because of environmental issues, such as climate change and measures to protect natural resources. Examples of environmental factors that can be ESG criteria include the following:

  • Energy consumption and efficiency.
  • Carbon footprint, including greenhouse gas emissions.
  • Waste management.
  • Air and water pollution.
  • Biodiversity loss.
  • Deforestation.
  • Natural resource depletion.

Social

Social factors address how a company treats different groups of people — employees, suppliers, customers, community members and more. The criteria used include these examples:

  • Fair pay for employees, including a living wage.
  • Diversity, equity and inclusion (DEI) programs.
  • Employee experience and engagement.
  • Workplace health and safety.
  • Data protection and privacy policies.
  • Fair treatment of customers and suppliers.
  • Customer satisfaction levels.
  • Community relations, including the organization’s connection to and impact on the local communities in which it operates.
  • Funding of projects or institutions that help poor and underserved communities.
  • Support for human rights and labor standards.

Governance

Governance factors examine how a company polices itself, focusing on internal controls and practices to maintain compliance with regulations, industry best practices and corporate policies. Examples include the following:

  • Company leadership and management.
  • Board composition, including its diversity and structure.
  • Executive compensation policies.
  • Financial transparency and business integrity.
  • Regulatory compliance and risk management initiatives.
  • Ethical business practices.
  • Rules on corruption, bribery, conflicts of interest, and political donations and lobbying.
  • Whistleblower programs.