ESG is a strategy for achieving long-term financial performance by reducing future risks by considering non-financial factors such as the company's approach to the environment, how it communicates with its social environment, and its ethical values and management mechanism.
When the World Economic Forum's Global Risk Report for 2021 is analyzed, it is clear that the main risks in the world in both the short and medium-term are epidemic diseases, climate change, and livelihood difficulties. The extent of the damage caused to the global economy by the pandemic we are currently experiencing is an example of this situation. Global risks are grouped under the heading of environmental risk and emphasizes the importance of ESG for companies and investors.
At this point, ESG criteria come into play. The requirements refer to situations in which companies must adapt to have sustainable governance. If we look at some of these criteria classified under the headings of environment, social, and governance, under environmental problems; climate change and carbon emissions, air and water pollution, biodiversity, deforestation, waste management, energy efficiency, and water scarcity. In social governance, we can mention that criteria such as customer satisfaction, data protection, privacy, gender and diversity, employee engagement, community relations, human rights, and labor standards come to the fore. Finally, there are topics such as the corporate governance framework, the structure of the supervisory board, transparency, bribery, and corruption under the concept of governance.
Integration with the above ESG criteria has a vital place in measuring companies' sustainability. The extent to which a company complies with the ESG criteria is an essential determinant in determining the impact of the company's investments and the relevant risk situations. Today, in connection with the increasing number of countries adopting zero carbon emissions, environmentally friendly investments are expected to increase in the coming years. On the other hand, surveys show that young people prefer the products of companies that are concerned about social and environmental issues. Considering all the aspects, it is safe to claim that many organizations will need to adapt to ESG standards in the future to achieve efficient financial success. Today, meeting the ESG criteria can be viewed as a critical investment in a company's future.
Author:
Irem Derya
Source:
Şirketlerin Hayatta Kalmak İçin ESG meselelerini Etkin Yönetmeleri Kritik, Beste Göksel-İldem Demir, Ekim 2020,
Kapitalizmin Beyaz Atlı Prensi: ESG, Murat Berk, 22 Nisan 2021
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