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ESG - Environmental, Social and Governance

Demand for transparency on socially responsible practices is on the rise. Corporates are being held accountable to various stakeholders on the impact of their operations in the community and the world at large. ESG criteria have become an increasingly important topic for a list of core stakeholders ranging from companies, investors, financiers, customers, employees, and non-governmental organizations.

*ESG is one of the most important topics on the Board agenda these days. Key stakeholders are now expecting that ESG or Sustainability reporting will be part of a company’s ongoing reporting process and will form a key consideration for their relationship with the company.

The term ESG is often interchangeably used with sustainability, considering that both have the same objectives of improving a company’s business practices by boosting its competitiveness and winning confidence of the investors, customers, and regulators.

The ESG criteria are considered as the evolution and an integral part of the traditional sustainability reporting. It is a monitoring tool, strongly linked to the corporate long term strategy, the targets of which can be re-assessed on the basis of its annual progress. 

Disclosing the firm’s ESG performance is linked to access to sustainable funding, easier penetration in new markets and, in general, improving those characteristics that increase competitiveness in the market. 

Currently, the energy and shipping sectors have been exploiting the benefits of ESG largely. However, ESG will soon become an integral part of most economic sectors and will redefine the global corporate map as time progresses. For example, recently, the European Central Bank has announced the need for all EU banks to conduct green stress tests in 2022. ESG could play a key role in measuring the climate risk of the EU banks exposure.

*ESG reporting guidelines refers to the disclosure of data and indicators covering the firm’s operations in three areas: Environmental, Social and Corporate governance.


Environmental considerations might include climate change mitigation and adaptation, as well as the environment more broadly, for instance the preservation of biodiversity, pollution prevention and the circular economy.

Social considerations could refer to issues of inequality, inclusiveness, labour relations, investment in human capital and communities, as well as human rights issues. 

The governance of public and private institutions – including management structures, employee relations and executive remuneration – plays a fundamental role in ensuring the inclusion of social and environmental considerations in the decision-making process.

[1] Definition of sustainable finance, European Commission, 2021.