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ESG: Environmental, social and governance

ESG is not a new concept, the definition has been in use for many years. It is a fundamental part of the social contract between business and society and usually managed as part of "CSR" or Corporate Social Responsibility.

There are a few definitions of ESG circulating, and we prefer the one set out above: "Environmental", "Social", "Governance". These three terms capture the three major axes of social responsibility that every corporate should be considering as they carry out their day-to-day business. Typically these three ESG concepts are translated into standards that are then applied across a business.

ESG: Environmental

.. covers a company's energy and water use, waste, pollution, and treatment of animals. It also extends to its carbon footprint and the materials that are used in its products - and in how products might be recycled at their end of life. Related concepts include:

  • "Net zero" - broadly ensuring that all its operations do not contribute to climate warming.

  • "Scope 3" - which refers to the extended supply chain of a business, so ESG includes not just its direct activities but also those of its suppliers and suppliers of those suppliers etc.

  • "Circular" - a key concept related to sustainability, meaning that the company's activities and products are capable of being recycled so that the materials used go round in a circle to become new products and not dumped

ESG: Social

.. covers how company treats its workers and the society in which it operates - manifested through how the company conducts it business relationships and performs its under its social contract. This area includes how the company works with its supply chain, for example, how suppliers get paid. It also covers how workers are treated in its direct operations and in its supply chain: for example: are workers paid on time, are they forced to work, do they have adequate provision for holidays, breaks and time off, and how well are these policies implemented in practice? Other stakeholders are also important - for example, the local communities in which the business operates, and the wider pastoral needs of the families, customers and suppliers that are involved in helping the business to be successful.

ESG: Governance

.. relates to the principles by which a business operates. For example, are there equal opportunities for male and female staff, how does the company make decisions, how are conflicts of interest managed. are there proper procedures in place for whistelblowers and processes to minimise the risk of fraud, illegal payments or corrupt practices?

The UN sustainable development goals mapping to ESG

13 of 17 UN SDGs map across to ESG.

Another way to think about ESG is to put it in the context of the sustainable development goals that the United Nations published and adopted in September 2015 - commonly known as the "UN SDGs".

The International Chamber of Commerce (ICC) has just completed a mapping exercise of the 17 UN SDGs in the context of trade finance - see here.

The extract from their report shows the mapping that they have come up with. You can see here that "Human and Social" (meaning the "S" and the "G") map to 7 of the SDGs, whilst Environmental "E" maps to 6 SDGs.

What does ES3G do with ESG?

ES3G provides a simple system to measure the S of ESG by collecting the views of the workers:

  • This is authentic, third party data that we collect directly. They tell us, and we tell you.

  • Our systems cover all-the-workers, all-the-time, in real-time and across all-the-suppliers.

  • It is a low cost, scalable way to monitor human rights due diligence across global supply chains.

See here to sign up for a free trial in your own workplace - or to set up a simple pilot of our technology across up to 20 suppliers.

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