The term ESG (Environmental, Social and Governance) is not new, but in recent years it has gained notoriety by appearing in various media channels. Along with this growth of the theme, a series of doubts about sustainability in companies also appeared. Let’s understand more by talking about the meaning of ESG and how it applies in practice.
WHAT IS ESG
ESG is an acronym in English that corresponds to the environmental (Environmental) social (S ocial) and governance (G overnance) practices of a company.
“ESG is nothing more than the capital market’s vision of sustainability. It is the same object, seen and worked on by different actors”. – Carlo Pereira, Executive Director of the UN Global Compact Brazil Network.
The term appeared in 2004 in a publication of the Global Compact with the World Bank, called Who Cares Wins. The objective was to provoke financial institutions to integrate environmental, social and governance factors in the capital market, that is, to encourage more investments focused on companies aligned with global sustainability goals.
The pressure for sustainable initiatives in companies is growing not only because of the environmental impacts we are facing, but also because of pressure from consumers and the new generation of investors, such as Millennials and Generation Z who show greater interest in investing in sustainable projects.
Therefore, in addition to the pillars of sustainability being essential for us to think about a green economy and future business, companies can use the ESG concept as a guide to attract and retain investors.
BUT AFTER ALL, WHAT IS SUSTAINABILITY IN COMPANIES?
Often when we hear the word sustainability we already think of nature, the Amazon, recycling and other topics involving environmental conservation and the climate emergency. But sustainability includes other factors, as in the concept of the sustainability tripod.
The tripod of sustainability is a concept created by John Elkington that says that the company must be “ecologically correct, socially just and economically viable”. Therefore, a responsible company must think about the impact of its products and services in these three spheres.
Another concept that guides sustainability strategies in companies are the SDGs, Sustainable Development Goals. There are 17 goals determined by the United Nations (UN) in 2015 and make up a global agenda for the construction and implementation of policies that aim to guide humanity until 2023.
The 17 indicators are composed of targets and guidelines to facilitate their application, making the SDGs a very important tool for sustainable development and ESG practice in companies.
See here how Orizon applies these principles in its activities.
ESG MEANING AND APPLICATION
Now that you understand what ESG is – an acronym for E nvironmental (environmental), S ocial (social) and G overnance (Governance), how it applies to the financial market and how it connects with sustainability, let’s go talk about the meaning of each letter of the acronym and how each indicator can be put into practice within companies.
ENVIRONMENT (ENVIRONMENTAL)
This pillar talks about environmental care: buying from environmentally responsible suppliers, treating their waste, applying reverse logistics to their products, reducing GHG emissions, etc.
SOCIAL
It considers the social impact that the company has on its employees and also on its surroundings. Two examples:
- Respect and not violate human rights;
- Understand the positive and negative impacts of the activity and promote the local development of communities and territories
GOVERNANCE
Governance concerns the way the company is run and how it relates to all of the company’s stakeholders. In the pillars of governance are equity, accountability and transparency.
It is important for the company to understand that ESG is more than just a way to stand out in the eyes of investors. The ESG concept is a guide, an umbrella, which will compose a series of initiatives responsible for the company.
In addition to complying with legislation and working on marketing to improve the company’s image, one must think about which corporate initiatives can really make a difference in a critical environmental and social moment such as we face today with the climate emergency.
Here at Orizon, for example, we say that we were born ESG, because in addition to the governance present in our day-to-day activities, the work developed with the communities surrounding our ecoparks – whether social or environmental education – and the treatment of waste itself solid, we are dedicated to enabling the transformation into renewable products that will help the environment and the entire population. Biomethane generation, for example, represents:
- Renewable electricity supply.
- Sale of carbon credits.
- Decreased GHG emissions into the atmosphere.
- Diversification of the Brazilian energy matrix.
Within our website you can understand more about the practices in Orizon ‘s ESG parameters.
