G for governance - Five ESG facts you should know

A new paradigm for responsibility. We've gotten used to saying CSR, green and responsible. Now you probably can't avoid learning ESG as well. ESG stands for Environmental, Social & Governance. Although it may sound like a rebranding of the CSR concept and a promise to be "green" and "sustainable", ESG can be seen as a new paradigm for how companies are measured and weighed on their responsibility.

The ESG concept has now become very relevant for investors. And it has arisen because investors no longer choose companies solely on the basis of key figures, but look at the company's entire impact on the environment.

ESG is used to compare companies across the board. Today, companies are valued on the basis of their impact on the world around them and their risk profile, and an ESG rating makes it cheaper and easier for companies to raise loans. ESG data is used as a supplement to traditional company analysis (pdf), and it has been widely adopted by major auditing firms and consultancies.

Responsibility is no longer "nice to have" but a "must have". Corporate responsibility is no longer about winning customers and marketing yourself positively, but about not losing money and investments, or being behind the times. CSR has often been perceived and presented as an expense, and the ESG concept makes it clearer that doing nothing can be more expensive in the long run.

Governance instead of charity. The concept of governance is an expression of orderliness and responsible leadership. It is about taking responsibility at management level for ensuring that the entire business complies with ethical guidelines. This can be anything from taking responsibility for the entire supply chain, ensuring a uniform gender composition on the board or responsible handling of anonymous whistleblowing. Responsibility is therefore no longer a matter for the communications or CSR department, but now affects the company's fundamental values. With a starting point in ESG, management not only takes responsibility for environmental and social considerations in the company's production chain. It also takes responsibility for ensuring that the entire business is healthy and properly run, and that it rests on a foundation of accountability and principle.