Making sense of ESG in two minutes or less – regulations, frameworks, and standards
Known Impact
14 November 2024
So, what does ‘ESG’ stand-for and mean?
Environmental, Social, Governance
- Environmental: How a company’s internal and external operations impact the environment and nature
- Social: How a company impacts people and society including its own employees, supply chains, and communities.
- Governance: How a company leads, directs, and governs itself, looking at the board and its representation as well as other internal systems and controls
ESG Regulations – what are they?
- ESG regulations are rules and laws created by governments or other official bodies requiring companies to act on, report, and disclose on environmental, social, and governance (ESG) issues to ultimately improve their performance in these areas. The purpose behind this is to encourage and highlight transparency, accountability, ethical business practices, and sustainability across ESG areas to ultimately have a positive impact on people and the planet.
ESG Frameworks – what are they?
- Frameworks provide guidelines to support companies in deciding what they should report on regarding ESG. These are suggestions for how to structure and disclose ESG information. Generally they are not legally binding however some frameworks are required by governements particularly in countries with stricter ESG regulations.
ESG Standards – what are they?
- Standards give detailed instructions on how to measure and report on specific ESG metrics. These can help with consistency and tracking. Just like frameworks, some standards are required by law in certain industries or regions.
What sectors and industries does ESG apply to?
ESG applies to all sectors and industries however some requirements may vary depending on the industry
What size company does this apply to?
It can vary depending on the country and requirements however generally these are required of large companies and some medium sized companies. Medium-small sized companies are sometimes encouraged to voluntarily report on ESG requirements. This is good practice either way but in some cases could futureproof business if it grows or requirements change.
So, what’s next?
If you’re new to ESG a good place to start is to benchmark and review what companies of similar size and focus are doing when it comes to ESG. If you’re well versed in it you may want to start thinking of ways to enhance the areas you have identified gaps in, where you can improve, or how to align your values and vision to your ESG goals. Currently there is no universally global framework or standard to respond to ESG so it is always evolving but one thing for sure is that it is growing and becoming more of a focus for consumers, employees, investors, governments and more so you’ll definitely want to stay tuned.
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