What are ESG (Environmental, Social and Governance) criteria?
In recent years we have witnessed a growing concern of society for different aspects related to sustainable development. As it could not be otherwise, this interest has also been reflected in the business world, to the point that sustainable investment in Spain grew by 36% in 2019, as reflected in the 2020 study by Spainsif.
But what exactly do we mean when we talk about sustainable investing?
Commonly known as socially responsible investments (SRI), it is a type of investment that, in addition to financial analysis, considers compliance with ESG (Environmental, Social and Governance) criteria. These types of factors are increasingly used when financing a business.
A bit of history about corporate sustainability
In itself, the concepts of investments or sustainable or ethical criteria are nothing new. Already in the 90s, the progress of sustainable investment was a fact and it was decided to launch the Dow Jones Sustainability Index, the first global index to introduce sustainability criteria. Shortly afterwards, the United Nations (UN) took a major step with the implementation of the Principles for Responsible Investment.
In recent years we have witnessed different legislative initiatives at European and national level aimed at promoting sustainability in companies, such as Non-Financial Reporting Act, definition of the EU Sustainable Sustainable taxonomy (which classifies activities that contribute to mitigating and adapting to climate change) or the development of the well-known “green bonds” for financing environmental projects.
It is not surprising, therefore, that the search volume of the acronym ESG has exploded in recent years.
*Search volume for ESG term in Spain (Google Trends)
Knowing ESG criteria
Within this current framework where society demands a more sustainable, enduring and ethical development; a scenario, moreover, that is under growing protection of European legislation and regulations, companies have decided to incorporate various environmental, social and good corporate governance factors into their business strategy.
It takes into account issues such as climate and climate change transition risks, scarcity of natural resources, pollution and waste, energy consumption, environmental assessment of suppliers’ products and services and management of environmental indicators, as well as environmental opportunities and other relevant issue.
It includes issues such as work factors, family reconciliation, equality within the company, good business environment, working conditions and risk prevention, talent retention, cybersecurity and information security, including the protection of personal data of the interested parties.
It includes elements related to Corporate Governance and the behavior and transparency of the company, such as the quality and effectiveness of the governing body, internal controls and the definition of responsibilities and authorities, risk management, audit criteria and the necessary policies, guidelines and codes established by senior management.
Benefits of an ESG Strategy
Firstly, and as we have seen throughout the article, these aspects seem to have come to stay, so it is expected that organizations that care about the environment, that are socially responsible and have good Corporate Governance, will benefit in the future (even more if possible) from European and Spanish regulation. As early as the end of 2020, Europe began to develop a new proposal on Sustainable Corporate Governance. In addition, a revision of the Non-Financial Reporting Directive and the approval in Spain of a new Law on the Prevention of Money Laundering are expected. Finally, on 20 May, Law 7/2021 of 20 May on climate change and energy transition in Spain was approved.
Likewise, as has been seen in recent years, poor management of any of these sustainability factors from organizations can have a media impact that can have a dramatic impact on the company’s image, especially taking into account the role of companies. social networks in the brand image.
Finally, we must not forget that companies are ultimately run and managed by people, and many of them are increasingly concerned about issues such as climate change or work-life balance and aspire to create and maintain an ethical and sustainable business.
How can we help you?
Historically GlobalSUITE Solutions has had extensive experience in projects related to ESG criteria, such as environmental projects (ISO 14001 and carbon footprint); crime prevention, anti-bribery and compliance projects (based on ISO 19601, ISO 37001 and ISO 37301, respectively); projects related to the Non-Financial Information Act, projects in the field of Information Security and Data Protection, Business Continuity and Crisis Management, Risk Management, etc. This experience has allowed us to design a global project for the compliance of companies with respect to the main ESG requirements, addressing in an integrated manner the three pillars of corporate sustainability, taking advantage of all the functionalities and benefits of our management tool GlobalSUITE®.