The growing concern with good business practices and social and environmental responsibility, especially of the younger generations, has guided decision-making for sustainable investment. The esteem of "responsible" businesses drives the adoption of good environmental, social, and corporate governance practices.
The principles of ESG constitute a set of criteria adopted by investors to evaluate a company's interaction with the environment and society, and the observance of high standards of corporate governance. These factors allow investors to have a holistic view of the main risks and opportunities of the company in which they intend to invest, as well as its contribution to sustainable development.
Among the practices that may be adopted by companies, the following stand out:
- Measures to preserve the environment, such as adequate waste management, the search for energy efficiency, reduction of emissions of pollutant gases, and encouragement of sustainable use of genetic resources from biodiversity;
- Social responsibility measures, such as the enforcement of labor rights and safety at work, the promotion of well-being in the workplace, attracting and retaining talent, encouraging diversity, responsible marketing, and concern for human rights and community impacts; and
- Improvement in corporate governance practices, such as the creation of more diverse boards, delimitation of the responsibility of directors and shareholders, respect for the law, adoption of ethical values in conducting business, promotion of anti-corruption practices, and transparency in the rendering of accounts.
The concept of ESG was outlined over time, while social and environmental issues gained importance in conducting business. The efforts culminated in the creation of the Principles for Responsible Investment - PRI ) in 2006 - an initiative of the United Nations (UN) and investors to integrate environmental, social, and corporate governance issues in the conduct of sustainable investments.
In the environmental sphere, especially after climatic and ecological events and with the pressure of the various stakeholders involved, legislation and regulations were promoted to make environmental responsibility an essential issue within companies. In this manner, companies started to create mechanisms to anticipate new regulations, decreasing the cost and increasing the efficiency of their business chain.
Companies that comply with ESG principles are more resilient and demonstrate greater ability to manage business in times of crisis and in the long term, becoming more attractive to investors. For this very reason, the topic gained even more importance during the crisis caused by the covid-19 (coronavirus) pandemic.
There is a growing movement towards adopting good environmental, social, and corporate governance practices in business management, as companies see in the initiative the possibility of reducing costs, mitigating risks, and creating new opportunities. In addition to the various benefits already mentioned, the adoption of ESG principles is associated also with reduction in regulatory and legal interventions, giving a competitive edge to companies that implement such practices and drive other companies to join the "new normal".
The trend towards the adoption of ESG criteria in business chains and the significant movement of business leaders and policies in relation to the issue demonstrate that the "new normal" is to invest in resilient companies capable of adapting to change and supporting sustainable development. More than results in efficiency for companies, the dissemination of ESG practices represents an achievement in terms of protecting the environment and society.