In case you still don't know what ESG criteria are, these acronyms stand for the following words Environmental, Social y Governance (environment, social affairs and governance). This, in practice, translates into those factors that make an organisation sustainable through its social, environmental and governance commitment. When applying these criteria in the organisation, we must never neglect the financial aspects.
Properly identifying, managing and measuring ESG criteria has a direct impact on a company's ability to receive investment, on its reputation and, of course, on the sustainability of the business.
What are the ESG criteria for?
In order to manage these criteria correctly, it is best to delimit the company's capacity for action in these areas so that investors can easily identify the intangible results.
A clear and organised ESG index will allow for more effective decision making, and investors will be able to recognise and reward the organisation's efforts.
ESG criteria
- Environmental: are those business activities that have a positive impact on the environment. These activities should not only be mitigation activities, but can be proactive.
- Social: are actions related to workers' working conditions and respect for human rights, as well as community relations management.
- Good Governance: includes issues related to the organisation's corporate governance, culture and management processes.
What ESG is not
In recent years, the focus on ESG criteria in the business world has increased considerably, so we need to know which strategies fall under ESG criteria and have a social impact.
To identify whether the organisation's strategies fall within these criteria, the key is the Sustainable Development Goals (SDGs), which were set by the UN in 2015 and are essential to be able to move forward with a sustainable plan.
However, these are not ESG criteria:
- Activities that are exclusively value-based in a general way. These activities must be supported by specific indicators that show the differential value and provide information.
- ESG parameters must bring novelty and business model, so nomenclatures that accompany existing processes are not ESG.
- The annexes within the income statement. The company's approach must be integrated and affect the business in a cross-cutting manner.
