What does ESG mean?

The acronym ESG is becoming increasingly popular among companies and it is likely to become critical in the coming years in order to remain competitive and meet the demands of consumers and stakeholders. But what does it represent and why is it considered so important?

ESG stands for Environmental, Social and Governance and is an important sustainability indicator for companies, providing information on their impact on the three parameters of environmental, social and governance.

Companies and businesses must be fully committed and accountable to external and internal stakeholders, taking into account these three main pillars:

  • ENVIRONMENTAL IMPACT: Companies have a duty to protect the environment and, therefore, must address issues such as waste and pollution management, greenhouse gas emissions and climate change;
  • SOCIAL IMPACT: companies must be sensitive to how their practices impact people, whether in terms of employee relations, diversity, health and ethics at work, or beneficial effects and impacts on local communities;
  • CORPORATE GOVERNANCE: companies must adhere to government rules and regulations and fair internal conditions and regulations (tax strategy, board diversity and professional structure).

ESG as an advantage for companies

Over the past two decades, socially responsible investing has become much more popular than in the past and shows a more positive cost-benefit side. In fact, a study published by Harvard Law School: Forum on Corporate Governance and Financial Regulation, showed that investors who adopted an ESG-oriented strategy within their corporate culture made more profit than those who did not, especially when analyzing the long-term outcome.

Today, ESG factors have become an integral part of investments in major companies. They provide companies with an additional boost in terms of reputation and a basis for building and strengthening relationships with external stakeholders.

ESG: the future of digital marketing

Today, many companies are basing their marketing strategy on ESG, a trend that is set to grow, as it contributes to increased brand awareness, profits and customer relations.

Consumers, employees and investors are becoming increasingly aware and informed about social and environmental issues and want, if not demand, that companies have a positive impact on society and the environment.

Digital marketing, which allows brands to reach their target audience in an efficient and targeted manner, represents an opportunity for companies to communicate their position on ESG and demonstrate their commitment to these values and gain a competitive advantage over those that do not.

ESG is especially key when it comes to the younger generation, such as Millennials and Generation Z, who are tech-savvy and have a strong awareness of environmental protection, social justice and ethical management.

Why should digital marketing consider ESG?

Millennials and Generation Z have changed the corporate culture and the market. A recent survey shows that Generation Z is more likely to buy sustainable fashion than Baby Boomers. The value of a company no longer depends only on the products it sells, but also on its ethical contribution to society. Companies with a purpose record higher earnings, grow faster and have more satisfied customers.

According to Deloitte’s article ‘Purpose is everything’, brands that sincerely work on sustainable goals are changing the future of business.

Furthermore, online interest in ESG continues to grow. As our observatory on user search trends “Sustainability: what do users search for on Google?”, which can be downloaded free of charge, shows, the query “ESG” registers a volume of 18,100 searches per month, indicating a growing awareness of and concern for ESG issues among internet users.

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