What does ESG stand for in sustainability accounting?

In sustainability accounting, ESG stands for Environmental, Social, and Governance. This term is critical as it represents the three central factors used to measure the sustainability and societal impact of an investment in a company or business.

The environmental aspect refers to how a company performs as a steward of nature, including its policies and practices related to factors such as climate change, resource depletion, waste, and pollution. The social component examines how it manages relationships with employees, suppliers, customers, and the communities where it operates, focusing on aspects such as worker rights, diversity, and community engagement. Lastly, governance deals with a company’s leadership, audits, internal controls, and shareholder rights.

Understanding ESG principles is essential for investors and stakeholders who prioritize responsible and sustainable business practices, making the awareness and application of these concepts pivotal in the field of sustainability accounting.