What Is ESG?

Companies looking to solidify their brand and global identity need to consider the impact of their operations on the environment. Many consumers are interested in more than a price point for services, and highly qualified talent is attracted to companies that care about having a sustainable future. The world is rapidly changing, and as more information becomes available, it becomes easier to see the damage your business practices may be having on the Earth. It’s time to move beyond the question “What is ESG?” and implement a solution.

What Is ESG in the Context of Business?

The term ESG is a business acronym that stands for “environmental, social and governance.” The term is commonly used with investing, as it broadly categorizes a sustainable approach to investing. For a business, investment opportunities are a way to increase revenue streams and expand the consumer market. However, in today’s eco-conscious society, there is increased attention on running a business that is sustainable and maintaining a positive impact on the greater global society.

With clients, partners and consumers supporting their environmental view with their purchases and contracts, it is impossible to ignore the ESG factors that define your business. The three factors add significant value in doing business in a good way, of which the overall results tend to be higher rates of both productivity and profits.

Environmental

For this factor, any information about a company’s direct impact on the environment must be assessed. This includes:

• Pollution
• Waste
• Energy use
• Animal treatment
• Natural resource conservation

Any risks that the company’s businesses practices might have on the physical environment are taken into account in light of how a company must address and manage the potential risks. Compliance with regulatory agencies, the control of toxic emissions and disposal of waste products are all examples of the environmental factor.

Social

The social factor that helps answer “what is ESG?” stands for the way a business manages its relationships. In particular, it evaluates whether the network of partners and suppliers supports and maintains the same values the business itself stands behind. These values aren’t just about a sustainable impact on the earth’s resources but can include local community involvement, nonprofit support, health and safety programs for employees and prioritized involvement with stakeholder interests.

Governance

This final factor signals the ethical nature of a corporation, as it deals with how the company creates and uses accurate accounting measures and transparent leadership and administrative practices. Problematic practices include when conflicts of interest abound in a company’s choice of board members or a company relies on political contributions for preferential treatment in the industry. Illegal practices are not tolerated, but investors need transparency to know what is going on.

These are comprehensive issues, and not every company will be able to earn an “A” in each category. However, there should be enough information available to help investors look at the most important criteria and decide from there.

What Are the Benefits of Defining What Is ESG? 

The fundamental purpose of having your company define ESG and its relevance to operations comes down to the human beings involved, not only those who work for your company but those who are served or aided by your company. There is a moral reason to look out for the human race and its global habitat. Fortunately, investing in mankind sets your business apart from the competition and yields other tangible benefits.

Sustainability isn’t just a conversation starter among entrepreneurs, investors and business executives. It is a mainstream conversation that demands action. The perception of a company goes a long way in establishing longevity, and making decisions that encourage a specific perception help to determine the company’s valuation. An ESG focus affects management decision-making. Consequently, investors and consumers seek out a strong ESG performance and record, showing their support with the spending.

The issues that define ESG factors continue to evolve and change, but companies that manage ESG risks and trends for the long term are more likely to be resilient when hardships occur. Consider the spread and impact of COVID-19. Companies that adapted and gave the public perception of acting responsibly during the crisis didn’t suffer as drastically or negatively on the stock market. Support for social issues, such as the Black Lives Matter movement, through diversity and fair employment practices have also garnered increased positive attention and climbing revenue streams.

A strong ESG strategy can have many positive results:

• Increased capital from increased investor interest
• Protected valuation from compliance with global regulators and governments
• Increased shareholder satisfaction
• Heightened consumer perception and loyalty
• Informed practices for long-term growth and sustainability

How Can Businesses Improve ESG?

Efficiency and effectiveness are two buzzwords for modern business, but there is a clear difference between being operationally effective and developing a strategy for improvement. Making a business be effective involves simply following and improving upon the practices that already exist in the industry. Developing a strategy can involve taking a risk to be different and show a clear distinction between your company and all its competitors. This is what your ESG strategy must do.

Depending on the industry, general ideas for improving ESG could be adopting special waste or water management systems, changing to renewable energy sources or lowering emissions from corporate properties. While these are common practices within the ESG framework and don’t define your company as innovative, they can still go a long way. Though not all ESG issues are given the same importance, making just one creative change can have a noticeable impact on the public perception of your ESG.

Rocketrip Can Help Resolve What Is ESG

In all of our operations, Rocketrip is committed to sustainability and eco-friendly operations. We’re not just an incredibly convenient booking platform for rental cars, flights and more. Our educational tool helps employees understand what is ESG and how they are helping their company maintain a better ESG focus. It provides real-time information on which travel options are the most environmentally friendly and tracks the carbon footprint of your traveling employees. Find out how your company can save money and the environment by getting started with Rocketrip today.