Environment, social, and governance: What exactly is ESG?

If you haven’t heard the acronym ESG yet, you will soon. The acronym stands for environment, social, and governance. Its growing presence in sustainability and corporate social responsibility discussions signals a shift in how companies approach these activities. Here, Advito leader April Bridgeman unpacks the definition of ESG and its implications for business travel programs.

What is ESG?

April Bridgeman, Managing Director and Senior Vice President, Hotel Solutions
  • Environment – This element focuses on the environmental impact of a company.
  • Social – This area focuses on a company’s social impact in terms of relationships with employees, customers, suppliers, and stakeholders. community.
  • Governance – The governance piece centers around policies that balance financial goals with social and environmental responsibility and driving positive change.

ESG structure and performance make a difference to a company’s ability to attract investment. A CNBC report found that a third of millennials are interested in the ESG approach of the companies they invest in, and 72% of Americans are at least moderately interested in sustainable investing.

ESG metrics: measuring success

Treat ESG reporting with the same rigor you do financial reporting. Here are some of the areas you might measure:

ENVIRONMENT

  • GHG) emissions
  • Carbon footprint
  • Sustainable sourcing

SOCIAL

  • DE&I representation across the company
  • Employee wellness
  • Employee retention, and where appropriate, retraining

GOVERNANCE

  • Representation of regularly excluded people at the board level
  • The board’s oversight of the company’s climate strategy
  • Executive compensation guidelines

Why is ESG important?

Potential investors pay attention to ESG, but that’s not the only reason it matters. Creating and fulfilling ESG goals is socially and environmentally responsible. PWC research found:

  • 86% of employees prefer to work for companies that share their values
  • 83% of consumers believe companies should be active in shaping ESG best practices
  • 91% of business leaders think that companies should take action on ESG issues

Creating value

Adopting an ESG framework can make your business better. McKinsey & Co suggests  that ESG creates value for companies through increased growth, reduced costs, improved productivity, reduced regulatory interventions, and improved investment opportunities.

ESG and business travel

When it comes to your business travel program, ESG requires a mindset shift to thinking about the social impact of your program and its governance structure. One of the best ways to approach this is to collect data that allows you to measure that impact across the board. For example, your travel data will help you forecast demand, see which trips have a useful business impact, keep track of emissions, look after employee wellness, assess your DE&I impact, and much more.

To learn more about what this means for your business travel program, check out Advito’s sustainability practice. And find out how Advito’s employee engagement expertise can help you communicate your ESG initiatives to your employees to galvanize their support.

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