What it is?
ESG are the principles by which the involvement of the company in solving environmental, social and managerial problems is achieved. G (Governance) is responsible for the effectiveness of leadership. This includes a wide range of activities.
- Compliance with regulations.
- Prevention of participation in illegal activities.
- Fair and qualified leadership.
- Reasonable salaries of top management.
- Compliance with the principles of equality and non-discrimination in holding leadership positions.
- Transparent financial and tax reporting.
- Respect for the rights of shareholders (for example, permission to vote on important issues).
- Prevention of fraud and corruption.
- Prevention of unfair preferences.
Today large and small businesses can become more efficient by adhering to these principles. In the future, this helps to achieve high financial results, retain and attract qualified employees, and win in the competition.
Why is it so important?
The main goal of the ESG and the management criterion is to ensure a high quality of life for people in the long term.
How does it ideally work? Employees of companies have the right to career growth and movement within the company, including the right to occupy leadership positions in accordance with their skills and abilities. At the same time, employees who do not occupy a place in top management feel the fairness and effectiveness of the work of management. This is achieved through a clear structure, transparency of management processes and the practice of "open doors".
Compliance with the principles of fair corporate governance allows companies to more accurately fulfill their obligations, improve their reputation, and reduce the risk of financial and reputational damage.
If a company adheres to the principles of good corporate governance, cases of reporting fraud, fraud and corruption are practically minimized. Even if this happens, the incident is quickly identified, and the employees responsible for the violation are fired. This allows the owners to be sure that the company's reputation is stable, and each employee contributes to its well-being.
In addition to the social effect, companies that follow the principles of ESG receive tangible financial profit: stock prices are rising, and the business strengthens its position in the eyes of customers, partners and end consumers. Compliance with the principles of sustainable development also increases the investment attractiveness of the company and the likelihood of loans from big banks.
How to build such a structure?
Fair governance is built into the company's system while respecting the other two principles of ESG, since all components are highly dependent on each other.
For example, refuse from disposable tableware in a restaurant puts a lot of pressure on dishwashers. This means that they need to provide better working conditions and a revision of the employment contract in accordance with the changed conditions. This requires fair and qualified managers in the field who are able to communicate with subordinates and other managers.
The first step to take is to align business priorities with the ESG agenda. Ideally, a complete review of priorities and their change in accordance with new values is needed, but profit and concern for the future of mankind can coexist. This requires sincerity and balancing costs and income - part of the profits should go to ESG activities.
In large companies departments of compliance are created. Employees within such a structure deal with issues of compliance with internal and external requirements. Traditionally, the compliance department originated in the banking sector, where it prevented regulatory risks associated with losses due to non-compliance with the law.
Today, such departments are created not only in the banking sector. Compliance management is aimed at complying with external and internal requirements, as well as identifying violations and protecting the company from their consequences. Any changes in external requirements are tracked, and employees are informed and trained in this regard. A modern user often encounters elements of compliance management - for example, with digital information systems.
The pandemic has played a significant role in establishing the principles of sustainable development. Many companies had to think about ESG: improve the working conditions of their employees and give them additional social guarantees. That is why today you can observe a high level of operational infrastructure: we managed to pump up preparedness for different situations, mobility and speed of decision-making.
The activities of Noventiq are closely related to the principles of ESG. By digitally transforming businesses and offering IT solutions to customers, Noventiq contributes to the creation and development of sustainable, fair and healthy communities.
Compliance with the principle of corporate governance in the company is reflected in the independence and diversity of the Board of Directors, its effectiveness and qualifications.