What is ESG?

ESG is an acronym for environment, social, and governance which are used as criteria in evaluating companies' non-financial performance. Specifically, these criteria are used in assessing companies' behaviors for making sustainable development. ESG are used by various stakeholders such as investors, customers, or employees, to analyze the firms' impact on global sustainability and the value of such sustainable actions.

Environment, Social, and Governance Factors

"E" stands for environment, as it refers to the interaction between company and environment. The examples include climate change, greenhouse gas (GHG) emission, resource depletion, air and water pollution, biodiversity, and waste management, deforestation, energy efficiency, and water scarcity.
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"S" stands for social, as it refers to people and culture within a company. The examples include gender and racial diversity, employee engagement, customer satisfaction, human rights, labor standards, and community relations.
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"G" stands for governance, as it refers to the internal system of a company. The examples include the company's leadership, bribery and corruption, lobbying, whistleblower schemes, and political contributions.

Importance of ESG

The concept of ESG is significantly important especially for the stakeholders, as it does not only consider the services or products, but the whole process in a business. The stakeholders are able to analyze how a company contributes to sustainability through the business behaviors, conducts, supply chains, and other relevant considerations.

ESG vs. CSR

ESG is often used along with the term Corporate Social Responsibility (CSR) as CSR also concerns the company's impact or footprint on the society, environment, and the economy. Even though two concepts look comparable to each other, they address two different ideas. As mentioned above, ESG refers to the criteria which aid in evaluating firms' non-financial performance. However, CSR refers to the management concept in which companies are able to integrate corporate social responsibilities in terms of society, environment, and the economy.

A key difference between them is that CSR is used by individual firms in order to develop a business model, while ESG is used by the investors in order to make valuable investments in terms of environment, social, and governance factors.

ESG vs. SRI

SRI is an acronym for socially responsible investing, referring to one type of investing method that considers environmental and social impacts. As ESG and SRI both refer environmental and social factors in respect of investments, they often look alike as well. However, the major difference between two concepts is that ESG considers how to make an investment decision towards firms who are leading in terms of environment, social, and governance factors. But, SRI rather considers how to not to make an investment decision towards firms who do not meet the standards of being friendly to environment and society.

How to Realize the Full Potential of ESG?

Carnot Innovations aids in diverse firms achieving ESG through the use of smart building technology. The Internet of Things (IoT) and automation technology brings in predictive maintenance of buildings, specifically for the Heating, Ventilation, and Air-conditioning (HVAC) system. The proven benefits include the followings:

Through the collaboration with Carnot Innovations, companies are able to achieve the following outcomes:

Contact Carnot Innovations and request a demo!