In the "race" towards sustainable development of businesses in the future, integrating ESG (Environmental - Social - Governance) principles into the strategies and operations of organizations and businesses plays an important role. So what is ESG? "Sustainable investment", "sustainable economy" are concepts that are attracting increasing attention from investors and businesses.
Read more:
- What is ESG report? How to implement ESG report
- ESG becomes more important than ever after the impact of the COVID-19 pandemic
What is ESG?
What is ESG? ESG (Environmental – Social – Governance) is a set of standards that measure factors related to the sustainable development activities of a business. It includes environmental, social and corporate governance criteria.
Promoting the application of ESG throughout the value chain will encourage businesses to contribute more to the sustainable development process, with a greater impact on the community.
Environment
The environmental standard (Environment) refers to the level of impact of the business on the environment in the production process. It includes policies on energy use, waste treatment, pollution reduction, climate change adaptation, natural resource conservation, and animal welfare.
Social
The social standard (Social) considers relationships with stakeholders both inside and outside the company. It aims at factors related to relationships with partners and customers, as well as with employees. These include:
- Ensuring privacy and security, especially of customers' personal information.
- Community-oriented activities, ensuring social justice and corporate ethics, fighting against racial and gender discrimination, ...
- Ensuring the working environment and conditions for employees. This includes ensuring occupational safety, fairness in treatment, compliance with regulations on wages, working hours, insurance policies, ...
Governance
ESG governance standards ensure that a company uses accurate and transparent accounting methods, practices honesty and diversity in selecting leadership, and is accountable to shareholders.
ESG investors may require that companies avoid conflicts of interest in selecting board members and senior executives, not use political contributions to gain preferential treatment, or engage in illegal behavior.
ESG sustainable development trend in Vietnam
Currently, ESG has become one of the leading standards for investors to choose investment companies, especially during and after the Covid-19 pandemic. In addition to economic benefits, compliance with ESG is a company's survival choice.
Investment flow into ESG-compliant companies is increasing strongly with the development of the ESG ecosystem. Investors are increasingly interested in the core values of companies rather than just using conventional financial indicators.
In Vietnam, the stock market is always volatile. Therefore, investors need to focus more on the operating platform of the business. They often prioritize companies pursuing sustainable goals and responsible operations. This is predicted to be a more stable and strong investment in the future.
ESG Standards
ESG is abbreviated by the first three letters of Environment - Social - Corporate Governance. This is a set of 3 standards for measuring the orientation and sustainable development activities of businesses. ESG helps organizations identify risks and opportunities, as well as the impact of applying them to operations.
ESG scores are evaluated based on the impact of the business on the environment, society, and corporate management performance when managing those impacts. The higher the ESG score, the more it proves the good ESG practice brand.
ESG standards include a variety of issues, originating from international law, local laws, or agreements, principles in each country. To implement ESG, businesses need to meet 3 main cores with dozens of specific criteria.
ESG investment creates competitive advantages for businesses
This is a new governance standard, evaluating the Environmental, Social, and Governance factors of the business. Investing according to ESG standards not only simply selects reliable companies but also creates significant competitive advantages for businesses.
Attracting Investors and Increasing Stock Value
More and more investors are interested in ESG factors and prioritize investing in companies with effective environmental, social, and governance performance. This can lead to an increase in the company's stock value, attracting new investors and reducing financial risks.
Enhancing Company Image and Building Trust
Companies that perform good ESG activities will have a positive image and be considered reliable by customers, business partners, and the community. This can lead to increased trust and good relationships with stakeholders, contributing to creating a competitive advantage.
Risk Management Enhancement
Investing in ESG factors helps companies evaluate and manage risks related to the environment, society, and governance. Building good ESG policies and standards helps reduce legal risks, manage resources more effectively, and create a positive work environment.
Attracting and Retaining Talent
Companies with a strong ESG strategy often attract and retain talent, especially those who have appropriate ESG values and beliefs. Implementing ESG helps to enhance employee pride and commitment, improve quality of life, and ensure health and safety for employees.
Conclusion
ESG is an acronym for environment (Environmental), society (Social) and corporate governance (Governance). Adhering to ESG principles helps businesses grow steadily and gain recognition from the community and investors.
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