The Definition of ESG (Environmental, Social and Governance)

Definition of ESG (Environmental, Social and Governance)

ESG stands for Environmental, Social and Governance. It is a set of criteria that investors, customers, regulators and employees use to judge how well a company manages risks and opportunities that go beyond short-term financial results. ESG data is reported in sustainability reports, regulatory filings, supplier questionnaires and ratings.

For EHS teams, ESG is not a separate discipline. Much of the data that goes into an ESG report, such as injury rates, emissions, spills, waste and training records, is already collected by environmental, health and safety programs.

The Three Pillars of ESG

• Environmental: greenhouse gas emissions, energy use, water, waste, pollution, biodiversity and climate risk.
• Social: worker health and safety, labor practices, human rights, diversity, training, community relations and supply chain conditions.
• Governance: board oversight, ethics, anti-corruption, executive pay, risk management and how sustainability is overseen.

Why ESG Matters

Large customers increasingly require suppliers to report ESG data during tenders and pre-qualification. Lenders and insurers use ESG performance when pricing risk. In some jurisdictions, such as the EU under the CSRD, sustainability reporting is a legal requirement for large companies.

Example of ESG

A mid-sized construction contractor bidding for a utility project was asked to supply its lost time injury frequency rate, Scope 1 and 2 emissions, a modern slavery policy and evidence of board oversight of safety. Because the company already tracked incidents and fuel use in its EHS software, it could answer the social and environmental questions in days rather than weeks.

Frequently Asked Questions: ESG

Is ESG the same as sustainability?

They overlap. Sustainability is the broader goal of operating without harming people or the planet over the long term. ESG is the set of measurable criteria used to report and assess that performance.

Where does workplace safety fit in ESG?

Worker health and safety sits in the Social pillar. Metrics such as LTIFR, fatalities and recordable incidents are among the most commonly requested ESG data points.

Is ESG reporting mandatory?

It depends on the company and where it operates. Some jurisdictions require it for large companies, while many smaller businesses report voluntarily because customers or investors ask for it.