What Is ESG & Why Should We Care?
Conscious Investing Through Environmental, Social, & Governance Standards
ESG stands for Environmental Social and Governance. The term represents an organization’s corporate financial interests that focus mainly on sustainability and ethical impact. These three key factors help an organization measure and report on their overall impact in regards to their practices around sustainability and ethics.
In addition to considering the potential financial outcomes, investors commonly use this generic term throughout capital markets to evaluate the big-picture behavior of companies. ESG investing is often used interchangeably with sustainable investing, socially responsible investing, mission-related investing, or screening. Most socially responsible investors check companies out using criteria related to ESG to vet investments.
The ESG factors are a subset of non-financial performance indicators that aim to show impact. For example, there may be systems in place to manage the company’s carbon footprint and to ensure accountability.
The number of investment funds that incorporate ESG factors has been growing rapidly since the beginning of this decade. It is likely that they will continue to rise significantly over the decade to come. Investors may choose to invest based on shared values they have with an organization. Another way they may choose is to evaluate impact and invest in companies whose impact they want to support. Or it could be that an investor decides to integrate ESG risks and opportunities systematically into their investment portfolios.
The Three Central Factors of ESG
There are three main factors related to ESG. The first factor is environment, and the criteria examines how a business performs as a steward of our natural environment. The criteria focuses on waste and pollution, resource depletion, greenhouse gas emission, deforestation, climate change.
The social part of ESG is a set of criteria that examine how a company treats the humans involved in their processes. It concentrates on employee relations and diversity, working conditions, including child labor and slavery, health and safety, and connections with or among local communities. ESG investors seek explicitly to fund projects or institutions that will serve poor and underserved communities around the world.
The governance criteria looks into how an organization manages itself. This includes their tax strategy, if there is corruption and bribery and how they handle it, political lobbying, conflict resolution, and diversity and structure of the board or administration.
Many companies may wish to cash in on the growing interest of ESG investors. Unfortunately, without rigorous data validation, some companies may pretend to be more sustainable than they are to attract investors and also customers. This deception is greenwashing.
Greenwashing may look like deceitful marketing to clients. It may also look like misleading claims about sustainability or impact to investors. Greenwashing may also occur when a company touts the ESG benefits of something but fails to also disclose the negative ESG-related consequences of that same thing.
All forms of greenwashing need to end. But how?
How can consumers feel trust in their favorite brands when they learn about common greenwashing tactics? And how can brands that are truly making big impacts attract clients (or investors) that share their values when there is such a widespread lack of trust and transparency?
The consumer demand for ethical practices is here. And many companies truly care about the earth, our communities, and the climate, beyond merely cashing in on consumer demand. The problem is often in creating real connections between them within our globalized systems and structures.
Producers Trust is on a mission to solve industry trust issues. With our variety of digital tools, we have traceability and transparency solutions for large corporations and small brands.
Marketplace & E-commerce Site
Our marketplace currently features over 1000 producers and farmers, most of whom are small to medium enterprises. They can join our platform at no cost to them and build their profile, link to their channels and media, showcase their certifications, and share a bit of their story. Consumers can browse the marketplace and filter by various search options. E-commerce will soon be a feature here!
StoryBird: The Traceability Tool for All Companies
This is our digitized traceability and storytelling application that comes with QR codes for product packaging. Consumers can scan the code and learn about the entire supply chain journey of the product they are holding. Producers can use the app to share their story and impact. StoryBird ensures transparency for a product by giving information from the entire value chain.
Data Validation Services
For larger corporations that wish to meet consumer demand for sustainability and ethical impact, plus reduce their carbon footprint and Scope 3 reporting, we have tools for data validation. What does this mean? It means we will be supporting them as they transition to transparent measurement and reporting of their carbon impact, climate action, and/or other ESG risks and opportunities.