GENERAL INTRODUCTION ESG THEM

GENERAL INTRODUCTION ESG THEM

Over the last few years, the financial and economic world has come closer to issues of public interest, in particular to issues related to sustainability. What has been said has led companies to evaluate their performance by integrating traditional economic evaluation methods with ESG indicators, an acronym for "environmental", "social" and "governance", thus measuring respect and corporate virtuosity towards the environment, of the company and the interests of the various "stakeholders": all of this is not exclusively valid from an ethical point of view, but constitutes in the long term a competitive advantage of primary importance for the company, as the investors themselves are influenced by these parameters in their investment decisions. Proof of this is the fact that already in 2019 40% of institutional investors in Europe and 46% in Italy were attentive to ESG issues (source: www.mercer.it) when pondering their investment decisions.


ACRONYM

The ESG acronym consists of the following criteria:

  • "E" of environmental, are environmental criteria that evaluate how a company behaves and respects the environment in which it is located and the environment in general, not only in relation to its production cycle. In fact, the values ​​relating to production pollution, waste disposal and so on are considered by way of example;
  • "S" of social, are parameters that monitor the social impact and examine the latter in relation to the territory, the internal corporate human capital understood as employees, external human capital or suppliers, customers and more generally with the communities with which the company operates or relates. It follows that the existing corporate relationships are examined at 360 °;
  • “G” of governance, are the principles that animate correct and healthy company management inspired by good work practices, ethical principles, compliance with current regulations. In this sense, salaries, respect for staff rights, communication transparency in social decisions and company choices, the inclusion of minorities and so on are monitored.

HISTORICAL EVOLUTION

ESG parameters have distant roots in time but have assumed an increasing relevance when they have been standardized in order to evaluate the company's work, thus making them shareable and comparable on the market: all this has ensured that the company's free choice to adopt virtuous behavior has become the subject of evaluation by rating agencies and public opinion. Furthermore, over the years it has been the supra-national regulatory bodies themselves that have included this taxonomy in the new regulations, in fact requiring a complete adaptation by the companies operating on the market: by way of example, it is recalled that in 2015 the General Assembly of United Nations has approved the "Agenda 2030" action program for sustainable development, divided into 17 macro-objectives, Sustainable Development Goals, to be achieved in the environmental, economic, social and institutional fields: the European Union has made a commitment to guide the implementation phase, by integrating the objectives mentioned in the European policies themselves. For this reason it is easy to understand the incentives and preferential treatments offered to virtuous corporate conduct such as, for example, the financing of sustainable activities or investments aimed at favoring a strategic repositioning with respect to corporate sustainability or climate risk; or considering this issue linked to bond investments, the launch and subsequent incentive of the so-called "green bonds" and "social bonds" that combine social interest, since they create value for society as a whole, with the economic value of individual companies .


VALUE CREATION

A new concept of creation of corporate value has therefore been defined, no longer exclusively limited and limited to the single economic interest of profit, but oriented towards a collective well-being: in fact, the environmental and social sustainability of the production process are now considered essential elements both to preserve the quality of the product or service offered, but also not to damage the entire surrounding community. Furthermore, companies with a high ESG rating will be perceived by the market as less risky: empirical evidence shows that the latter will benefit from a lower cost of capital than the competition, exploiting a better credit rating and thus managing to attract new financial and human resources. These capitals can be readily reinvested in order to foster innovation, have greater efficiency of production, management and work processes and a further reduction of business risk: in this way a continuous creation of value is generated for the company, a virtuous circle that will feed itself over time.


ETHICAL CODE

Lastly, in order to provide a better understanding to the reader and orient him in practice, the extract of a corporate Code of Ethics of an Italian multinational in the agrifood sector, very active on issues relating to the ESG, is reported: "... in carrying out of its activities, the company undertakes to safeguard the surrounding environment and contribute to the sustainable development of the territory ... it undertakes to operate in compliance with current environmental legislation, applying the best technologies available in order to minimize the environmental impact direct and indirect ... aims to raise awareness among employees and external collaborators on environmental issues, planning the development of their activities aimed at promoting initiatives, actions and improvement programs for widespread protection of the environment through a concrete environmental policy . "

Edited by: Mattia Christian Scioli, Chartered Accountant

 

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For more information:

mattiascioli@valoreassociati.it

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