What is ESG primarily used for?

ESG stands for Environmental, Social, and Governance. It serves as a framework for evaluating a company's performance in terms of sustainability and its broader societal impact. This includes how companies manage risks and opportunities related to environmental changes, the relationships they build with shareholders and stakeholders, and their governance practices.

By assessing ESG factors, investors and stakeholders gain insight into a company's ethical impact and sustainability practices—elements that are increasingly important in financial decision-making. Focusing on ESG allows companies to demonstrate their commitment to responsible practices, which can lead to long-term value creation and enhance their reputation.

While analyzing marketing strategies, profit margins, and employee satisfaction are important for overall business operations, they fall under different categories of analysis. ESG specifically targets the sustainability practices and societal contributions of a company, making it a distinct and crucial aspect in today's business landscape.