ESG stands for Environmental, Social & Governance. An area of business that is becoming higher on the agenda for all types of businesses. For those with no previous knowledge, we have broken down the areas impacted at a glance.
A companies impact on the natural environment.
Greenhouse gas emissions (GHS)
Energy and natural resources
Pollution prevention and control
Agriculture and land use
How a company manages its relationships (employees, customers, suppliers, communities and society in general).
Health and safety
Labour standards/working conditions
Privacy and data protection
Diversity and inclusion
Supply chain management
How a company is governed.
Leadership and corporate governance
Remuneration and incentives
The key drivers of change
There is a growing consensus that climate change and sustainable developments are the 21st century’s major challenges.
Corporates are coming under significant pressure from institutional investors to articulate their approach to them and in particular their transition plan for a net-zero future.
Soft law commitments
The breadth and wide-ranging implications of ESG initially resulted in principles based frameworks as a result of inability to adopt global or even national regulatory change.
Companies’ public commitments to these can be superficial. Increasingly, they are not risk free. Failure to “walk the talk” can lead to claims and serious brand damage.
In the EU, the commission is engaged in a rapid and ambitious roll out of green regulation, initially impacting financial markets but extending into industrial activity. This is increasing regulatory obligations to report on and assess ESG risk and opportunities.
Brexit FAQ Update by Beata Dunn, Partner at Aria Grace Law