ESG for Global Business: Benefits, Practices, and Key Concepts
ESG in International Companies: Benefits & Core Concepts
Benefits of ESG for International Companies
- Improved Reputation: Sustainable companies build trust, credibility, and a positive public image.
- Talent Attraction: It improves the work environment and attracts skilled, committed employees.
- Access to Financing: Investors and governments value ESG criteria when providing funding or subsidies.
Climate Change Mitigation Measures
By International Corporations
- Investment in Renewable Energy: Companies can use solar, wind, or hydroelectric energy to reduce emissions.
- Reducing Supply Chain Emissions: Evaluate suppliers and lower total CO₂ emissions in the production process.
By Individuals
- Use of Sustainable Transport: Walk, bike, or use public transport instead of a car.
- Responsible Consumption: Buy local, eco-friendly products, reduce waste, and consider consuming less meat.
- Energy Efficiency at Home: Use LED bulbs, turn off lights, and choose efficient appliances.
ESG Pillars: Key Actions
Social Pillar Actions
- Managing fair working conditions
- Promoting diversity and inclusion
- Ensuring human rights in the supply chain
- Guaranteeing access to basic services (healthcare, internet, nutrition)
Governance Pillar Actions
- Transparency in decision-making
- Board structure
- Ethical management and anti-corruption
- Respect for shareholder rights
ESG Governance Best Practices
- Board Quality: A diverse and independent board makes fair decisions.
- Anti-Corruption Measures: Prevent unethical practices like bribery.
- Shareholder Rights: Ensure transparency and fair voting power for stakeholders.
Understanding Corporate Responsibility
Carroll’s Pyramid: Four Layers
Carroll’s Pyramid explains corporate responsibilities:
- Economic: Be profitable.
- Legal: Follow the law.
- Ethical: Be fair and moral.
- Philanthropic: Give back to society (donations, volunteering).
CSR vs. ESG: Key Differences
Corporate Social Responsibility (CSR) is broader and voluntary, focused on ethics. Environmental, Social, and Governance (ESG) includes measurable criteria for sustainability, used by investors.
Scenario: ESG Pillars at Risk
If a company has poor working conditions, low wages, and no data privacy policy, it is failing in the Social pillar (labor rights, employee treatment) and Governance (data protection, transparency). Improvements should include fair wages, better working conditions, and robust data privacy policies.
Key ESG & Sustainability Concepts
Anti-Corruption Measures
Actions taken to prevent unethical practices like bribery and ensure integrity.
Board Quality
Refers to a diverse and independent board that makes fair and effective decisions.
Carroll’s Pyramid
A model showing the four responsibilities of a company: economic, legal, ethical, and philanthropic.
Circular Economy
An economic system focused on reusing, recycling, and reducing waste to create sustainable growth.
Climate Change Mitigation
Actions taken to reduce or prevent the emission of greenhouse gases to slow down global warming.
Code of Conduct
A document outlining the values, rules, and ethical principles employees must follow in a company.
Compliance
The act of following laws, rules, and internal company policies to avoid legal and ethical risks.
Corporate Social Responsibility (CSR)
A business approach ensuring activities are not only profitable but also ethical and beneficial for society.
Due Diligence
The process of carefully checking third parties (suppliers, partners) for legal, ethical, or compliance risks before and during a business relationship.
Environmental, Social, and Governance (ESG)
A framework used to evaluate a company’s sustainability and ethical impact across three areas: environment, people, and governance.
ESG Assessment
Evaluation of how a company manages environmental, social, and governance factors.
Greenwashing
When a company falsely promotes its products or actions as environmentally friendly to appear more sustainable than it really is.
Key Performance Indicator (KPI)
A measurable metric used to track progress and performance.
Materiality Analysis
The process of identifying and prioritizing ESG topics most important for a specific company and its stakeholders.
Renewable Energy
Energy from natural sources that are constantly replenished, such as wind, solar, or water.
Risk Assessment
A method for identifying potential threats to a business (legal, environmental, social) and setting up actions to prevent them.
SDGs (Sustainable Development Goals)
17 global goals created by the UN to achieve sustainable development.
Shareholder Rights
Ensuring transparency and fair voting power for stakeholders in a company.
Stakeholders
All people or groups affected by a company’s actions—employees, customers, suppliers, investors, and the community.
Sustainability
Meeting the needs of the present without compromising the ability of future generations to meet theirs.
Tone at the Top
The ethical attitude and behavior shown by a company’s top leadership, which sets the culture for the entire organization.
Whistleblower Channel
A confidential way for employees or third parties to report unethical or illegal behavior inside the organization.