What does ESG mean?

What is ESG?

ESG is still a relatively new phenomenon in sport and can certainly feel overwhelming when viewed as an additional consideration on top of stretched budgets and resources. Furthermore, action on ESG is also increasingly expected – if not required - by a range of stakeholders, including participants, fans, employees, and even partners and funders. 

Fortunately, organisations need not feel as though they are at a standing start. ESG, like many other new areas, is a virtuous circle - the more people do it, the easier it gets. More guidance, more support and more recognition of its importance treads a path which others can follow large parts of to reach their destination more effectively.

ESG stands for environmental, social, and governance. It refers to the way in which an organisation manages its own impacts on, risks related to, and opportunities arising from, environmental, social and governance issues.

ESG can take on slightly different meanings in different contexts. It was originally a term used by investors in the corporate sector, when looking at a variety of non-financial criteria to measure a company’s behaviour and performance. Many investors may choose to include ESG criteria when they are deciding which firms to invest in. This goes for partners in the sports sector too. And funders.

Whilst ESG remains an investment term, the term can also be used more broadly across a whole variety of organisations and sectors. In this context, ESG can include a range of ethical and sustainability issues, and is linked to an organisation’s purpose and values, its social or community activities.

Effective consideration of ESG underlines not only sound governance practices, but also how an organisation goes about its business and activities. It provides a range of opportunities for organisations to demonstrate their values, culture and ethics, engage in meaningful dialogue with both internal and external stakeholders and reinforce their legitimacy as a force for good.

Environmental

“Environmental” covers both the organisation’s impact on the natural environment and the environment’s impact on the organisation, including climate change impacts, direct impacts (the organisation’s own activities) and indirect impacts (throughout its value chain, including suppliers and customers or investments). 

Environmental issues include:

Social

“Social” covers the organisation’s interactions with, responsibilities towards, and impact on a range of stakeholders, including society at large. It is both inward looking – how the organisation deals with its employees, volunteers, participants, customers – and outward looking – taking into account the organisation’s relationship with the wider community in which it operates and extending as far as its supply chains and interactions reach. The social aspect of ESG encompasses considerations which cut across all aspects of what an organisation does and how it goes about doing it – its values, the standards it upholds, attitudes to human rights and equity.

Social issues include:

Governance

“Governance” is the process by which decisions are made and implemented in an organisation. It encompasses the system(s) of oversight in place for an organisation and the approach used to achieve strategic objectives. Governance covers the compliant and ethical conduct of an organisation’s activities and the controls in place for monitoring them, in line with its purpose and enabled through effective decision making and oversight.

Governance issues include:

To help you get to grips with the terminology, we have compiled an A to Z of the most frequently used terms you may come across.