January 23, 2023

ESG definition: What is ESG?

ESG stands for Environmental, Social and Governance. These are the three criteria used to measure the sustainability and social impact of a company’s investment. ESG covers a wide range of standards including environmental performance, labor practices, board diversity, customer relationships and more. Companies that score high on ESG criteria are seen as promoters of positive change in our society and they create long-term value for investors. Therefore, ESG criteria are important metrics that can be used to make sustainable investment decisions.


Understanding ESG Frameworks: GRI, ISSB, TCFD, ESRS

There are various types of ESG frameworks that are popular nowadays: GRI, ISSB (SASB), TCFD, ESRS by EFRAG. These ESG frameworks are used to disclose different types of ESG data.

The Role of Regulators in ESG Reporting and Certification:
After providing reports, companies are certified and scored by regulators such as EU taxonomy, New Corporate Sustainability Reporting Directive ( SFDR),  Corporate Sustainability Reporting Directive ( CSRD)  etc. By investing in companies with strong ESG ratings, investors encourage responsible corporate actions and promote a more sustainable future.


The Benefits of ESG Reporting for Companies: Attracting Investors and Building Trust

ESG reporting is the process of publicly disclosing a company’s performance in the context of the ESG criteria in an understandable, consistent and transparent manner. By using relevant ESG KPIs, companies can understand how their activities are perceived by stakeholders and investors, as well as providing them with valuable feedback on areas where they can improve. Companies that engage in ESG reporting also demonstrate commitment to sustainability and corporate responsibility, increasing brand loyalty and reputation.

ESG reporting is an essential tool for companies to attract investors and create long-term value. It provides stakeholders with valuable insight how their investments are impacting the environment and society, allowing them to make  fact based decisions. For these reasons, it’s going to be increasingly important for companies worldwide to take part in ESG reporting.


The Impact of ESG on Company Performance and Revenue

Additionally, ESG reporting has been shown to have a positive impact on a company’s performance. Studies have found that those with higher ESG ratings generally outperform their peers in the long-term, making them attractive investments for investors who are looking to generate returns while doing good for society.


Creating a Sustainable Future through ESG Reporting: Encouraging Responsible Corporate Actions

ESG reporting contributes to better performance as well as more transparency of companies, it can also serve as indicators for future financial performance. Investors can thus identify potential risks and opportunities at an early stage and make better investment decisions. It is therefore of great importance for companies to establish ESG reporting in order to remain both competitive and attractive to investors.

Ultimately, ESG reporting is an indispensable tool for companies to attract investors, build trust with stakeholders, and demonstrate their commitment to sustainability. It gives investors valuable insight into the impact of their investments on society and enables them to make informed decisions. When we encourage companies to produce ESG reports, we help create a more environmentally and socially responsible future for generations to come.


Would you like to learn more about ESG? We have compiled further information for you here.


Jens Siebertz

Jens Siebertz ist Senior Vice President bei INFORM DataLab.