Key definitions related to Environmental, Social, and Governance (ESG)
- Working Heroes
- Jan 5
- 3 min read
In today’s world, businesses are no longer judged solely by their financial performance. Stakeholders—ranging from investors and employees to consumers and communities—are increasingly demanding that organizations demonstrate their commitment to sustainability, ethics, and social responsibility. This shift has brought Environmental, Social, and Governance (ESG) principles to the forefront of corporate strategy.
But what exactly is ESG, and why does it matter? At its core, ESG is a framework that evaluates how organizations manage risks and opportunities related to environmental impact, social equity, and governance practices. It's a lens through which businesses can align profitability with purpose, fostering long-term resilience and trust.
In this blog post, we’ll delve into the key concepts and definitions associated with ESG, unpacking its three pillars and exploring why it has become a cornerstone of modern business strategy. Whether you’re an industry leader, an investor, or simply curious about the role of sustainability in shaping our future, this guide will provide the clarity and context you need to navigate the ESG landscape.
Let’s get started!
Environmental (E)
Carbon Footprint: The total greenhouse gas emissions caused directly or indirectly by an individual, organization, event, or product, measured in units of carbon dioxide equivalents (CO₂e).
Net Zero: A state in which the greenhouse gases emitted into the atmosphere are balanced by the removal of the same amount, aiming to eliminate a company’s or country’s contribution to climate change.
Biodiversity: The variety of plant and animal life in a particular habitat, crucial for ecosystem resilience and the sustainability of natural resources.
Circular Economy: An economic model aimed at minimizing waste and making the most of resources by designing products and processes to reuse, recycle, and regenerate materials.
Sustainable Development: Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
Sustainable Development by Working Heroes: Development that meets the needs of the present without compromising the ability of present and future generations to meet their own needs.
Social (S)
Diversity, Equity, and Inclusion (DEI): Policies and practices that promote representation and participation of different groups, ensuring fair treatment and opportunity.
Human Rights: Fundamental rights that belong to every person, emphasizing dignity, equality, and fair treatment.
Community Engagement: Efforts by organizations to collaborate with local communities to address societal needs and build strong relationships.
Fair Labor Practices: Ethical practices regarding wages, working conditions, and workers’ rights to ensure safety, equality, and dignity in the workplace.
Social License to Operate: The ongoing acceptance and approval of an organization by its employees, stakeholders, and the community.
Governance (G)
Board Diversity: The inclusion of individuals with different genders, races, skills, and experiences on a company's board of directors.
Corporate Ethics: A set of principles and standards governing the conduct of a business and its employees.
Stakeholder Engagement: The process of involving individuals, groups, or organizations that may affect or be affected by a company’s activities.
Transparency: The practice of openly and clearly disclosing information, processes, and decisions to stakeholders.
Risk Management: The identification, assessment, and prioritization of risks to minimize their impact on an organization.
ESG Reporting: The process of disclosing a company's ESG performance to stakeholders.
Cross-cutting ESG Concepts
Materiality: The significance of an issue in influencing the decisions of stakeholders or the performance of an organization.
ESG Ratings: Assessments that evaluate a company’s performance on environmental, social, and governance criteria, often used by investors.
Greenwashing: Misleading claims about the environmental benefits of a product, service, or organization to appear more sustainable than they are.
Triple Bottom Line (TBL): A sustainability framework that evaluates a company’s performance based on social, environmental, and financial dimensions.
Impact Investing: Investments made with the intention of generating measurable social and environmental impact alongside financial returns.
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