ESG is an acronym that stands for Environmental, Social, and Governance. It is a framework used to measure a business's non-financial performance in environmental, social and governance categories. It is used as a basis for various regulations such as the NFRD, CSRD and the SFDR.
The growing interest in measuring and ranking ESG by investors and businesses reflects the perspective that environmental, social, and governance dimensions should be factored in when considering business success.
Environmental factors include company policies around climate change, such as their decarbonisation action, natural resources, pollution and waste, and other factors.
Social criteria include human rights, labour standards across the supply chain, integration to local communities, and other social dimensions.
Governance includes business ethics, compliance, accurate accounting methods, salaries, structure for shareholders, and whether or not a company pursues integrity and diversity when selecting its leadership.