The ESG score is an assessment of a company’s performance and performance in relation to corporate sustainability. The key areas that determine the ESG score are, as the acronym suggests: environmental, social, and governance. The ESG score influences investors’ choices, both for reasons related to Social Responsibility and for reasons of financial reliability, as it is believed that companies with a high ESG score can perform better financially in the long run and are less prone to external risks such as climate change. Usually, the ESG score is embedded within a broader path, such as the Assessment, a tool that measures a company’s sustainable commitment and can provide the set of long-term sustainability goals to be pursued.
In this content we will examine the definition of ESG scoring and the impact it has within our ESG Assessment.
What elements does the ESG score consist of?
The ESG score can be divided into three categories, all of which are useful in making up the final assessment, namely:
- the environmental score, which refers to the impact that business activities produce externally. It includes aspects such as carbon emissions, natural resource use, energy efficiency, waste management and raw material sourcing;
- the social score, relating to factors such as respect for human rights, labor standards, diversity and inclusion, data security, transparency in communication choices and all those elements attributable to Corporate Social Responsibility;
- the governance score, which is used to assess a company’s operational standards and management practices. To achieve a high score, a company must perform self-auditing, regularly measure and evaluate its performance, maintain good relations with regulatory authorities, and manage risks effectively.
The combination of these three categories provides a specific picture about a company’s ESG performance; an element that, when placed within the broader context of the ESG Assessment, forms the basis for devising an effective and lasting strategy for pursuing sustainability goals.
Why aim to have a good ESG score.
Having a good ESG (Environmental, Social, Governance) score brings numerous benefits to companies, including:
- improved image and reputation: companies with a high ESG score demonstrate adherence to a concrete idea of Corporate Social Responsibility, thus being more attractive to customers, investors and partners;
- risk reduction: a good ESG score helps reduce financial, legal, and operational risks related to environmental, social, and governance issues. For example, a company committed to environmental sustainability is less vulnerable to environmental incidents and physical/weather events related to climate change, being resilient and able to cope adequately with any regulatory changes;
- access to more advantageous capital: investors who consider ESG criteria when choosing investments are increasingly numerous and willing to finance companies with good scores in this area. This translates into access to capital with lower interest rates and more favorable terms;
- attract and retain top talent: candidates are increasingly attentive to companies’ ESG policies and prefer those that demonstrate a concrete commitment to this area;
- development of competitive advantage: a good ESG score can distinguish a company from its competitors, giving it a competitive advantage in the marketplace in terms of corporate image, employer branding, and accountability to users and investors;
- greater growth opportunities: companies with an ESG approach are more likely to seize new business opportunities related to the transition to a more sustainable economy.
To achieve a good ESG score, companies must implement concrete environmental, social and governance policies and practices.
Calculate your ESG score with our ESG Assessment
The ESG Assessment activity consists of assessing how well environmental, social and governance sustainability principles are integrated into the company’s strategies, policies, objectives and activities, i.e., how well these are actually translated into daily activities and organizational methodologies applied in the company. Our ESG Assessment platform, after careful evaluation of the responses provided about the environmental, social and governance areas examined, provides a numerical value, the ESG score, which summarizes the company’s sustainability performance. It also examines industry best practices and indicates areas and actions useful for future improvement. Our ESG Assessment platform follows international standards and procedural rules, such as those issued by the Global Reporting Initiative for corporate sustainability reporting, which are called GRI Standards. For an approach to sustainability that enables organizations to maintain a competitive position and achieve stable returns while creating shared value over the long term, it is critical to measure business decisions and the real-world impacts they have on ESG to identify strengths and critical areas where work needs to be done. Our ESG Assessment helps the organization identify strategic areas to act on and how to do so, to progressively build a sustainable and successful approach. Consisting of three phases: questionnaire, analysis and report, with our Assessment companies can develop a long-term strategy based on an analysis of their sustainability performance and industry best practices.
Find out your ESG score with us
