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ESG stands for Environmental, Social, and Governance, and refers to a set of factors that account for a company’s responsibility and impact in relation to the environment, society and the way the company is managed and administered.
The evaluation of these factors has become increasingly important today as investors and consumers are looking for sustainable companies whose operations take into account both short- and long-term repercussions.
The concept of corporate responsibility has been around for many years, but its implementation as a quantifiable measure through ESG factors was not until the early 2000s, with an intensification in its use over the last decade as the environmental situation has become increasingly critical, along with the social struggles.
For this reason, ESG factors have become critical aspects in companies business strategies, as well as its reputation among stakeholders; it is a way to measure their commitment & accountability.
Why are ESG factors important?
ESG factors exist to highlight the impacts that companies have on society and the environment, as well as how they are managed and administered.
Without its existence, the responsibility for the transition to a better future is diluted and loses strength, since it involves several indicators that help verify their level of commitment, both qualitatively & quantitatively.
These factors can have a significant impact on the long-term viability of a company and, therefore, on its ability to generate value for its shareholders and other interested parties.
This is because the latter, and society in general, have become aware of the importance of ESG factors in evaluating the profitability of companies, including their future projection and current performance.
The importance of ESG factors lies in several key points:
- Companies with high ESG performance demonstrate a tangible commitment to society and the environment, which can generate good reputation and brand loyalty.
- Poor performance in these factors can increase financial risks by negatively affecting the company’s reputation and its ability to attract and retain talent, customers and investors.
- Companies with good environmental, social and governance policies often have better long-term financial performance due to their efficiency in resource management.
- Environmental and social regulations are increasing, so companies with poor ESG performance may face penalties and fines.
Achieving good performance in this area is important because it reflects a company’s responsibility and sustainability, and has a direct impact on its reputation, financial performance and legal compliance.
With all this, it is clear that ESG factors emerged as a way to evaluate the level of corporate responsibility, linked to very important issues today, such as their social and environmental policies. They also serve as an indicator for many investors as to where to allocate their funds.
What was it like before and how is change assured now?
Prior to the formal implementation of ESG factors, companies focused on maximizing profits and complying with applicable laws, which, in most cases, did not take into account the major issues of climate change, corporate corruption, impact on communities and the lack of fair conditions for workers.
However, as awareness of the importance of taking these factors into account and of the great responsibility that corporations have in this regard increased, they began to incorporate these corporate responsibility factors into their business strategies and decisions.
Thus, there was a substantial change in the way companies are perceived and tested by shareholders and consumers.
To ensure change in the right direction, today there is no single, centralized regulator for companies on ESG factors. Instead, there are a variety of organizations and initiatives that are responsible for doing so. Some of them are:
● The Organization for Economic Cooperation and Development (OECD): this organization develops principles and guidelines on corporate responsibility and provides guidance and resources to help companies integrate this aspect into their strategies and operations.
● Principles for Responsible Investment (PRI): this organization works with institutional investors to encourage the inclusion of corporate responsibility factors when deciding between different investment options.
● Global Reporting Initiative (GRI): it is an international entity that develops standards and measures to achieve a unified sustainability report, analyzing the integration of ESG factors in the strategies and operations of companies.
● European Commission: it is a body that has developed regulations and guidelines for the integration of these factors into investment decisions in Europe.
These are just some of the agencies responsible for promoting this oversight. In addition, many countries have national regulations or laws that address these issues and limit corporate decisions that may negatively affect the population or the national territory.
ESG Factors in Aleatica
Aleatica’s corporate pillars include sustainability, safety and corporate integrity, acknowledging that a company’s value proposition is not only based on the commercial offering itself, but on how it develops a long-term operation accountable for generating a positive impact within society and the environment.
Taking this into consideration, in 2021 the ESG Committee was created, focused on achieving a long-term commitment to add value in its operations, recognizing the need for its performance to be consistent with the Environmental, Social and Governance objectives and actions.
The company’s committee is conformed by representatives from different concessions and members of the management team who gather to report on progress and strategies on ESG-related issues.
The main objective of this committee is to establish an operational process that enables the achievement of the company’s responsible objectives and goals, as well as to comply with the Sustainable Development Goals of Agenda 2030, which Aleatica has adopted.
Specifically, this committee is responsible for:
● Establishing, agreeing and keeping under review the company’s ESG strategies, ensuring that they remain an integral part of the overall strategy and its implementation, while all of the company’s activities are aligned with them.
● Promoting dialogue with various areas of the company to understand their knowledge and expectations on related topics.
● Ensuring that the company acknowledges the impact of its activities, including shareholders, customers, employees, suppliers and the community at large, and that these activities are carried out in a responsible manner.
● To review social and environmental impacts, as well as potential human rights risks in the business, and make decisions aligned with ESG factors that constructively affect the operation and communities.
This way, Aleatica ensures its day-to-day commitment and results in terms of ESG factors, which are a fundamental part of the company’s identity and are evident in each of its actions, focused on creating smart, safe and sustainable long-term mobility solutions that drive the growth of both its employees and its users.
