The social pillar of ESG is about the people, both internal and external, with whom an organization interacts. The World Economic Forum identified three main people-related aspects of existing ESG reporting frameworks and standards: dignity and equality, health and well-being, and skills for the future.
Unlike environmental issues, which vary widely based on business operations and environmental impact, there are common social factors that most companies address. For example, health and safety, human capital management, participation and service to the community.
What does the ESG governance factor represent?
Corporate governance policies and practices focus on accountability, fiduciary duty, and audit and control mechanisms. Strong corporate governance ensures that a corporation conducts business ethically with honesty, trust, transparency, and fairness.
Benefits of ESG policies
The benefits for applying ESG in a company are innumerable: increased investor demand, work pressure, enterprise risk management and creation of competitive advantage. A good ESG strategy allows the possibility of entering new markets and increasing the presence in the current ones.
According to a survey conducted by PWC last year, 83% of consumers believe that companies should actively shape best practices and are willing to pay a premium when choosing an investment, service or product that is aligned with their values.
In addition, reduced costs in material consumption mean savings and, at the same time, an increase in ASG performance scores. However, we cannot lose sight of the fact that these programs require the allocation of resources for full-time staff or service providers and additional investments to carry out sustainability initiatives.
Good ESG practices also improve investor relations and attract capital. According to the recruitment consultancy Robert Walters, in just four years assets in sustainable funds went from 5 billion dollars in 2018 to 2.5 trillion in mid-2022. In this same analysis, Richard Townsend, director of Robert Walters in Mexico, he mentions that chief financial officers (CFOs) are expected to have a holistic vision and manage to incorporate ESG practices on a day-to-day basis.
We are late, very late; but, fortunately, players in the ecosystem —such as companies and consumers— are already worrying about having and leaving a better world for future generations.
