ESG

What is ESG and why is it important in business?

by Advance Real Estate 6 de September, 2022 847 Views

Read Time:3 Minute

The acronym ESG (Environment, Social and Governance) refers to companies’ environmental, social and governance principles, which are the basis for sustainable and socially responsible investments.

But, beyond the need for industrial ethics, knowing what ESG is and applying it properly is a reflection that all companies should propose to increase their attractiveness in the market and enhance their corporate reputation.

Environment and human rights then determine the ESG principles of companies, i.e., the set of values and commitments that will later translate into their contribution to environmental care and social welfare.

Both the industrial market and the end consumers demand transparency in processes and responsibility for companies’ ecological and social impact.

What are its principles and practices?

In 2015, the countries belonging to the United Nations group formulated the 2030 Agenda for Sustainable Development¹, which set out 17 goals from² which companies can generate initiatives congruent with the needs of the environment and the context in which they carry out their operations.

Thus, the ESG principles are derived from these purposes:

Ending poverty.
End hunger.
To provide health and well-being to workers and the community in which they live.
To provide quality education.
Ensure equal opportunities between genders.
Ensure availability of clean water and sanitation.
Seek affordability and sustainability of energy sources.
Offer decent work and economic growth.
Generate innovation in industry and infrastructure.
Reducing inequalities between people.
Contribute to the generation of sustainable cities and communities.
Encourage responsible production and consumption.
Taking action to curb climate change.
Protection of underwater life.
Protection of life in terrestrial ecosystems.
Peace, justice, and strong institutions.
Alliances to achieve new goals.

Although the values and campaigns in this area are based on the aforementioned axes, these will vary from one organization to another and will always be aligned with the specific environmental or social impact generated by its activity.

Importance of ESG principles in companies

A socially responsible company increases its chances of success in the marketplace. This is because investors make decisions based on financial performance and how the organization ethically responds to opportunities and threats.

Around the world, sustainable investment is a process supported by institutional regulations³ such as those imposed by the Paris Agreement on Climate Change or the European Commission in 2014, a year in which reporting by companies to prove their sustainable actions made it clear to the industry community what ESG is and its importance.

This provision obliges companies to publish financial information and the impact of their operations on the environment, information on the guarantees given to personnel, and the policies that ensure respect for human rights. This, to provide investors with these records as a tool for making informed decisions.In Mexico, there are Voluntary Standards on Sustainability, which are intended to ensure the⁴ protection of workers’ rights in certain sectors and industries and are also an instrument for accessing international markets.

These standards, which serve as evaluation parameters for any socially responsible company, are established by government agencies, private sector actors, and civil society in line with the Sustainable Development Goals.

However, in a practical sense, whether these initiatives can be realized will depend largely on the infrastructure that supports a company’s operations.

With the latter, we refer to buildings designed to save energy and endorsed with LEED Certification, the allocation of more square meters to green spaces, the construction of water treatment plants, and solar energy, among other actions in favor of sustainability.At Advance Real Estate, we contribute to our clients’ social and environmental responsibility projects through the development of industrial parks with all the necessary conditions for a sustainable operation with human sense. Contact us and join this change.

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Advance Real Estate

Advance is a leading company in the acquisition, leasing and operation of industrial and logistics assets, with presence in 12 cities within Mexico and a portfolio of 11.5 million sf of industrial space.

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