ESG criteria – Environmental, Social and Governance – are used to assess a company by considering not only financial parameters, but also environmental, social and governance factors.

A company operates within a network of relationships involving people, communities, the local area and the wider supply chain. Integrating ESG factors into business management means considering environmental and social effects alongside economic results, as well as the way these aspects are governed. But what exactly are these criteria and why are they essential for companies?

Environmental criteria

Environmental criteria concern the effects of business activities on the environment and include areas such as waste management, greenhouse gas emissions, use of natural resources, biodiversity, deforestation, energy efficiency and climate change.

Social criteria

Social criteria consider a company’s relationship with the people and communities affected by its activities. They include areas such as human rights, diversity and inclusion, employee relations, health and safety, and relationships with local communities.

Governance criteria

Governance criteria concern the structures, rules and processes through which a company is managed and controlled. They include, among other aspects, transparency, business ethics, risk management, management accountability, remuneration policies and the independence of governing bodies.

A structured approach to ESG factors can contribute to a company’s reputation and to the trust of investors, customers, employees and other stakeholders.

In recent years, ESG factors have increasingly become part of investment assessments alongside financial indicators. Their relevance varies according to the sector, the type of investment and the investor’s objectives, but they can contribute to the assessment of risks, business practices and long-term prospects.

A transparent approach to ESG matters can also contribute to customer trust, particularly when a company is able to explain clearly how it manages the environmental and social aspects that are relevant to its activities.

ESG factors can also play a role in attracting and retaining people. Working conditions, health and safety, inclusion and attention to social impacts can influence how an organisation is perceived by both current and prospective employees.

Attention to ESG factors can also influence research and development choices, encouraging companies to consider technologies and products designed with specific environmental and social aspects in mind.
Certain financing instruments or public programmes may include ESG criteria or requirements among their assessment parameters. Their relevance varies depending on the specific instrument and the applicable conditions.

Integrating ESG factors can also support a more structured approach to regulatory requirements and related risks. It does not replace compliance obligations, but it can help companies manage responsibilities, processes and areas requiring monitoring in a more systematic way.
Integrating these criteria into business management means taking a more structured approach to assessing the environmental, social and governance aspects associated with business activities.