ESG stands for environmental, social and governance. An ESG Strategy represents how a company operates regarding environmental issues and social responsibility. Investors often take into account a company's ESG strategy to gauge investment risk and ESG factors and score are used as investment screening tools.
When referring to lighting, the important category would be E - environmental. Environmental criteria may include a company's energy use, waste, pollution, natural resource conservation, etc. This specific criteria is also used to evaluate environmental risks that a company might face and how the company has managed, will manage, or is managing those risks.
In short, ESG factors, criteria, and strategies are used to measure how much a company cares about the environment and their effect on it.
A company's ESG strategy is important for a variety of reasons:
ESG Investing and Risk Management
ESG Investing is the practice of incorporating a company's ESG initiatives into an investment decisions. With consumers and investors increasingly more mindful of corporate responsibility initiatives, a company's ESG strategy is now an important screening tool and is often a big factor when stakeholders vet investment opportunities.
In 2020, Yahoo finance even added a sustainability tab that shows the ESG performance of a company and how it compares to competitors. This major change shows how important environmental factors are becoming to investors and consumers.
A Conscious Brand with Values
Developing an ESG strategy is not only beneficial for potential investors, but it also helps the company brand as a whole, by displaying a socially-conscious business approach and values to consumers.
It's increasingly more popular for consumers to care about a company's carbon footprint. Providing a solid ESG strategy will help consumers (and investors) understand that your company is dedicated to a more sustainable future.
Decreases Energy Consumption
Developing an ESG strategy will benefit you and your business in many ways. ESG strategies often include comprehensive energy optimization strategies, which often involve building and system retrofits. These onsite retrofits allow businesses to decrease energy consumption and operational costs. A win for your business!
Because of lighting's effect on operational costs, many investment and real estate groups are now standardizing LED lighting and retrofits for their properties and future investments.
