ESG
The abbreviation ESG stands for Environmental, Social and Governance.
It refers to a set of criteria that companies use to describe and assess their sustainability performance and social responsibility.
Environmental
This aspect covers how a company deals with environmental challenges. Topics include resource use, waste management and energy efficiency.
In this area, companies focus on issues such as renewable energy or their CO₂ emissions. Environmental indicators are used to measure their ecological footprint.
Social
The social criterion evaluates how a company manages relationships with its employees, suppliers, customers and the wider community. It includes fair working practices, human rights, diversity, health and safety in the workplace, as well as community engagement.
Concretely, this also covers many Human Resources topics, such as supporting apprentices or providing financial assistance for employees’ further education.
Governance
Governance looks at how a company is run. Topics include board composition, transparency, shareholders’ rights, ethics and anti-corruption measures.
Good corporate governance strengthens stakeholder trust and reduces risks arising from poor management.
It also encompasses issues such as data management and data protection, compliance with the law, risk management and security, transparent leadership cultures, anti-corruption efforts and fair competition.
CSR
Corporate social responsibility (CSR) covers similar aspects to ESG and also consists of three pillars:
- Social: improving working conditions, equal opportunities, diversity and integration.
- Environmental: reducing the carbon footprint, waste management, sustainable use of resources.
- Economic: Ethical business conduct, financial transparency, positive impact on the local community.
Want to learn more about CSR? Read our article.
How to differentiate?
In academia, the two concepts are differentiated in such a way that CSR primarily emphasises corporate activities relating to responsibilities and obligations, while ESG focuses more on performance and measurability vis-à-vis stakeholders.
