ESG = Sustainable Investing
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Business impact and is impacted by the environmental, social and governance issues. The ESG – acronym for Environmental, Social and Governance has steadily gained significance in the last decade as an indicator of a corporate’s growth performance, outlook, risk taking ability, profitability and sustainability.
Decoding ESG
Simply put, the ESG criteria of a corporate is:
Environmental – The natural resources consumed by a corporate, the effluents or waste it discharges and the consequent impact on the society.
Key indicators: (including but not limited to below)
- Consumption of water and power
- Discharge of waste / effluents
- Air / water pollution
- Carbon emission / carbon footprint
- Waste management
- De-forestation
- Climate change
- Re-cycling, use of recycled products in the course of work
- Conservation of energy initiatives
Social – relationship that the company maintains with people – employees, labour, vendors, other corporates, institutions and everyone it does business with.
Key indicators: (including but not limited to below)
- Employee relations
- Gender equality, diversity and inclusion
- Safety at workplace especially for women
- Grievance redressal, especially committee for sexual harassment
- Health, medical and safety measures at workplace
- Child labour
- Employment opportunities
- Customer care
Governance – the internal policies and practices framed by the management of the company in running the company, statutory compliance policy.
Key indicators: (including but not limited to below)
- Composition of Board – diversity including women members
- Pay structure of the Board
- Political contribution if any
- Indulgence in corruption including bribery.
- Statutory compliance
ESG basically indicates the profitability, value creation and sustainability of a business which has no or minimal negative impact on the environment or society.