What is ESG?

Last updated: 05.01.2024

ESG refers to the areas that underpin a company's sustainability strategy. This holistic perspective focuses on a company's environmental impact, its relationship with society and its management standards. Integrating these aspects helps companies achieve long-term value, benefiting not only the company itself, but also its stakeholders and the environment.

In Article:

• ESG is a strategic approach that focuses on three aspects of development that are not related to individual financial indicators.
• The integration of these three areas aims to benefit both the company and its stakeholders, while contributing to environmental protection.
• Using the ESG concept allows a company to focus on sustainable development by considering the impact of its operations on the environment, human resource relations and social justice, and strengthening good corporate governance.
• The purpose of ESG is to ensure that a company's operations are consistent with sustainable development values and good social and governance practices.
• Organizations that effectively implement an ESG strategy are able to build trust, increase their competitiveness and attract investors who are also interested in sustainability.

Table of contents

1. ESG concept
2. Individual elements of the ESG strategy
3. Implementation of ESG strategy - benefits for the company
4. Companies with functioning ESG reporting
5. ESG and the impact on investment decisions
6. The future of ESG

See also: Relationships in the workplace make people, the company and the world better

ESG concept

ESG is an acronym derived from the English words environmental, social and governance. It is a strategic approach that focuses on three aspects of development that are not related to individual financial indicators. The integration of these three areas aims to benefit both the company and its stakeholders, while contributing to environmental protection.

Using the ESG concept allows a company to focus on sustainable development by considering the impact of its activities on the environment, human resource relations and social justice, and strengthening good corporate governance. By applying this approach, the company not only gains financial value, but also raises its long-term prospects for success and benefits in the field of organizational development.

The purpose of ESG is to ensure that a company's operations are consistent with sustainability values and good social and governance practices. As a result, companies that effectively implement an ESG strategy are able to build trust, increase their competitiveness and attract investors who are also interested in sustainability.

Understanding ESG - the individual elements of the strategy

As a result of dynamic and global development, business is facing increasing light and environmental pressures. At such a moment, the ESG concept enters the company and becomes responsible for implementing the company's strategy and actions. ESG is a strategic approach that seeks to address three key elements: the environment, society and corporate governance. These three aspects are interconnected and form an integral part of how to conduct business in a sustainable and responsible manner.

In the area of the environment, the company focuses on reducing the negative impact of its operations on ecosystems and natural resources. It maintains awareness of its greenhouse gas emissions, water consumption, use of raw materials and other environmental aspects. By implementing ESG strategies in the environmental area, the company aims to become a more sustainable and environmentally friendly organization.

In the area of society, the company is committed to creating a positive impact on local communities and stakeholders. It invests in social programs, supports education, prevents discrimination and engages in community affairs. In addition, the company is committed to proper human resource management, ensuring safe and fair working conditions.

The final element of the ESG strategy is corporate governance. It focuses on integrity, transparency and an ethical approach to business. The company creates good corporate practices to ensure fair management and accountability to its stakeholders.

By focusing on these three areas, the company strives for sustainable and responsible management. Implementing an ESG strategy makes it possible to take into account both financial and social and environmental requirements, contributing to the long-term success of the organization and strengthening relationships with stakeholders.

Company's impact on the environment

The organization's activities have a direct impact on natural ecosystems, which includes many environmental aspects. With a focus on the environment, the company strives to minimize its negative impact on the environment by taking appropriate measures.

Organizations are taking a number of measures to reduce their carbon footprint. Investing in renewable energy is one of the key aspects to reduce greenhouse gas emissions. In addition, companies are striving to conserve water resources by implementing efficient technologies and processes that reduce water use.

Responsible waste management is also an important part of ESG strategies. Organizations set themselves the task of minimizing the amount and harmfulness of waste generated through the use of recycling, recovery of raw materials and reduction of consumption.

Companies are also committed to protecting biodiversity by taking measures to preserve ecosystems and endangered species. Examples include protecting forests, restoring natural habitats or supporting various environmental projects.

Modern organizations realize that their operations have a real impact on the state of the environment. That's why many are already taking steps to optimize their operations in a sustainable manner in order to improve the state of the planet. By focusing on ESG elements, a company can make the most of its environmental footprint and contribute to its protection and restoration.

Society builds the company

Such a business model not only brings social benefits, but also brings financial benefit over a longer period of time. Nowadays, more and more people, including customers or investors, are interested in companies' social policies and require them to take actions in line with ESG values. Organizations that fail to recognize the importance of their own social responsibility may find themselves in a difficult position, as the market increasingly demands that they be transparent and actively involved in social issues.

When companies consider their impact on society, they are also responding to the challenges of a lack of established policies, social inequality, extreme poverty and education demands. Companies use their position to contribute to social and economic equality, which is inextricably linked to a positive perception of the company by its stakeholders.

In line with ESG values, organizations are also taking steps to ensure decent working conditions throughout the supply chain. In this way, companies are creating social commitment from all their stakeholders, protecting their image and creating a business foundation that is ready for changing markets and difficult times.

How does the company function from the inside?

Organizations striving for sustainability engage their teams in creating and implementing practices that are consistent with ESG values. Involving employees in the decision-making process and taking their perspectives into account is key to successfully operating a company from the inside out.

As part of their ESG strategy, companies focus on creating appropriate governance structures that ensure transparency and accountability in decision-making. They provide training and develop their teams in ethical management, thereby creating a work environment based on shared values.

Companies also promote equality and diversity in the workplace. They strive to ensure fairness and equal opportunities for all employees, regardless of their gender, background or sexual orientation. Companies strive to create an atmosphere in which all employees feel respected and valued, which translates into their commitment and performance.

Good corporate governance takes into account the interests of other stakeholders, such as suppliers, customers, local communities and regulators. Companies strive to maintain good relations with these groups through transparent operations, participation in community initiatives and a responsible approach to supply chain management.

Transparency in reporting and reporting plays a key role in how a company operates from the inside out. Companies publish ESG reports to report on their activities, progress and sustainability goals. By ensuring transparency and accountability, companies build trust with their stakeholders and create a solid platform for long-term success.

Lessons learned from such company operations show that effective ESG management and attention to sustainability benefits the company itself, as well as its employees, customers and the communities with which it works. The impact of these practices reaches far beyond the boundaries of the organization and allows it to build a positive reputation and sustainable development.

What are the benefits to the company of implementing an ESG strategy?

The implementation of an ESG strategy brings additional benefits to a company that is committed to implementing appropriate practices. The implementation of an ESG strategy carries with it a good corporate reputation, employee loyalty and positively portrays the company in the eyes of investors.

Improving the company's reputation

All ESG-related activities in a company build its character. They present it as:

• responsible,
• sustainable,
• socially engaged.

Customers, employees and the community make the company will act in accordance with ESG values. Improving reputation affects customer confidence, attracts new customers and builds customer trust.

Satisfaction and loyalty of a good employee

Higher employee satisfaction and loyalty is a very important part of growth. Companies that engage in ESG are attractive to employees, especially younger generations, who are more attentive to the company's values, support and goals than previous generations. Employees are more motivated and engaged when their values are in line with company values.

This increases employee retention and attracts new talent. Nothing more is needed for a solid company to function than to engage employees of value to the company.

Confessed values are the measure of a good company

Investors are increasingly attentive to ESG when confirming investment decisions. Companies that operate in accordance with ESG are seen as reliable and more valuable. 

Consequently, more attractive to investors. Especially those who focus on responsible investing. As part of an ESG strategy, new investors can be attracted and the company's market value can be increased.

Adaptation to future regulation

ESG laws and regulations are becoming increasingly stringent. Companies that implement ESG rules early on are more likely to adapt quickly to future regulatory requirements. Acting in accordance with the ESG area, such as minimizing the amount of greenhouse gas emissions or using renewable energy sources, minimizes future costs resulting from the sensitivity of such solutions and adaptation to future requirements. 

What companies have already bet on ESG?

More and more companies are seeing the positive impact of the report of their activities on development. Among the organizations that have already prepared such a report are PepsiCO, CCC S.A. and Santander Bank Poland.

PepsiCO - ESG report and company development

PepsiCO is one of the world's major producers of soft drinks. Back in 2020, it clearly defined the topics that are important to them. By doing so, it made it clear that their development implementation efforts are a well-thought-out action strategy. ESG reporting only confirmed that the company knows the importance of transparency in its operations and showed that taking care of delivery and the supply chain has a real impact on the lives of communities, the environment.

The company's social responsibility is contained in the ESG Themes that PepsiCO presented some time ago. These are the company's activities that have a positive impact in areas:

• agriculture and procurement,
• environmental impact,
• products and nutrition,
• societies,
• ethics and governance,
• corporate governance.

All of this puts PepsiCO at the forefront of companies that have a real impact on improving the environment, community life and ethical corporate management.

CCC S.A. goes for change

CCC S.A. is a group operating in 20 countries in Europe and Asia. This fashion company combines a heavy dose of social responsibility, care for the environment and its employees. In the ESG report, the CCC Group boasts huge changes from the base year (2019).

According to the report, all stores in Poland are covered by used footwear collection. More than 90% of waste is recycled or otherwise recovered, and 100% of CCC Group facilities are powered by renewable energy.

CCC S.A. suppliers are required to comply with the Code of Conduct. The company conducts regular audits of the companies it works with. The company aims to eliminate the occurrence of accidents at work completely and eliminates any inequality among employees.

Through the steps taken by the company in ESG areas, the CCC Group is setting the standard for conduct on issues related to workers' rights, human rights and environmental protection.

Santander Bank Poland invests in the future

With its products, Santander Bank Polska is supporting its customers in the development of low- and zero-carbon investments. Already in 2020, the Bank has achieved internal CO2 neutrality, and by the end of 2030 it will cease to cooperate with energy companies whose revenue from coal-fired power generation exceeds 10%.

The bank operates in three areas: internally, it takes care of corporate governance and manages in such a way as to eliminate harmful environmental impacts, locally, it supports its customers, in their eco-transformation. The products the bank offers are designed to help take care of the environment. The third area involves activities on a larger scale. The bank plans to work only with companies and enterprises that strive for sustainable development.

In this way, Santander Bank Polska's management has a real impact on our country's environment and forces a positive transformation on its contractors.

In addition to influencing environmental change with real impact on the lives of local communities and their employees, the aforementioned companies, while creating an ESG report, are also taking care of their positive image in the eyes of investors. As a result, their shares achieve higher stock market quotations.

ESG and the impact on investment decisions

Assumptions in ESG areas have a huge impact on the investment decisions of companies preparing a sustainability report. Wanting to make a real impact on the environment, the community - both local and those inside the company, management must make informed investment decisions. With ESG, companies are deciding on green solutions to reduce their carbon footprint. They are looking more closely at their contractors and suppliers, and employee safety and comfort is more important than before.

This allows the company to grow safely, reduces the risk of losses, in case of legal changes, and gains informed, reliable and dedicated employees. ESG not only influences management, but is also an indicator of responsible business.

These factors make it safe for the company to look to the future and grow according to its beliefs. It can work for sustainable development and concern for the environment. ESG factors make investors look at the company more favorably. They know that taking care of the future of society and the planet will be the main goal of all developed and developing countries in the coming years. That's why meeting sustainability goals, and that includes ESG reporting, is important.

The future of ESG

The CSRD, which aims to standardize and impose ESG reporting by companies, will take effect in 2024. It will apply to the reporting of corporate sustainability data for 2023. In addition, the European Commission will impose ESG reporting obligations on more entities. No longer only listed companies will have to submit a sustainability report.

The new law forces reporting on companies and firms that are listed on the stock exchange, with annual net revenues of more than PLN 170 million and an annual balance sheet total of PLN 85 million.

This is not the end of the changes. By a decision of the European Parliament and the Council of Europe, three years later, all companies will be required to provide non-financial information on sustainability.

Companies' activities related to environmental protection, care for local society and corporate governance, included in non-financial reports, not only carry unique advantages. Starting next year, such a company's information policy and transparency in these three areas will be mandatory for larger companies. Corporate responsibility will become an integral part of it. In the coming years, companies must look not only at their financial well-being, but also at the company's impact on the environment and the community.

Want to talk about ESG-related measurements at your company? Contact us: schedule a meeting >>

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If the topic of ESG requirements and reporting is of interest to you, join our LEADERSHIP EXCELLENCE SUMMITevent, which will be held now on January 23, 2024 from 09:00 - 16:00 in an online format.
The theme of this year's Conference is 2 PERSPECTIVES OF EFFECTIVE FUTURE ORGANIZATION, and the event is divided into two thematic panels: Effective Development and Effective Transformation.

One of the speeches in the Effective Development panel will be How to turn risks into opportunities for company and employee development through ESG?, during which Dr. Marta Szymborska, an ESG expert with 15 years of experience in creating sustainability strategies and reports, will discuss in detail the topic of implementing ESG strategies in organizations.

During the speech you will learn about:

• ESG requirements in the context of company development,
• Ways to involve employees in the joint development of the organization,
• methods to increase the competitive advantage of companies, attract employees, improve customer satisfaction.

You'll also learn how, with ESG, to turn risk into an opportunity for business growth and employee engagement, and gain the chance to finance activities.

Check details >> LEADERSHIP EXCELLENCE SUMMIT 2024