The importance of ESG comes into play when dealing with risk mitigation because companies with policies addressing issues related to environmental sustainability are less prone to legal matters that deal with climate related affairs. In addition to this incentive, ESG goals also often lead to increases in innovation that open new markets for a company and helps them gain long-term value. 

Environmental

The environmental sector of ESG directly involves policies related to minimizing environmental damage, such as emission cuts, publishing sustainability reports, and the usage of renewable energy. Changes in the amount of attention put into dealing with environmental issues are important to diversify a company’s interests and contribute to large scale matters that require the attention of relevant groups such as dominating tech companies. A key example of environmental ESG implementation is the company Apple, which has been carbon neutral since 2020 and aims to create carbon neutral products by 2030. Such initiatives clearly boost investments and allow companies to have a presence on the global stage. 

Social

Although the term “social” can hold a variety of meanings in terms of a business, there are specific social focuses that are associated with ESG. Diversifying a company’s workplace environment and focusing on DEI (Diversity, Equity, and Inclusion) shows social awareness and has been a focus for many companies in many different industries. Such diversification includes eliminating wage differences between certain minorities, incorporating a diverse leadership team, and supplying/supporting a wide range of businesses. Involvement in these matters not only creates an equitable workplace environment, but also serves as a reputation booster for many companies who strive to have a modern presence in the market. 

Governance

Governance in a company has to do with the way management is structured and the interactions between employees and those in leadership. This involves factors such as the transparency of the company, ethical ideals, cybersecurity measures, and decision making protocols. Generally, ethical practices are essential in the business world because they assert positive values throughout the industry and reduce the chance of corruption or policy infractions. Businesses who aim to align their goals with the interests of their shareholders have good governance practices because their motives are supporting their entire community. When choosing shareholders, companies that target a wide range of investors, and involve these investors in a balanced way, promote positive governance standards. Another segment of governance focuses on maintaining data in a safe and efficient manner, without the possibility of cyberattacks or leaks occurring. All these measures create a secure community for the audience that a company reaches. 

When analyzing the developing field of business, it is important to understand these common standards that continue to impact the decisions of businesses and investors. ESG-related trends are rapidly changing and are slowly becoming the key to the dominance of certain companies in the upcoming years. As policies are changed, decisions are made, and goals are finalized, ESG will continue to have a revolutionary impact on the way businesses interact with the world.