Governance and the role of compliance: The G of ESG
ESG goes well beyond environmental issues. The social impacts related to ethics, transparency, and the fight against corruption are also vital parts of the famous abbreviation.
The ESG abbreviation first appeared in 2004 in a publication by the global United Nations (UN) organization. But it’s only been a few years since the topic has been widely used and debated in the corporate world, forcing companies to address the issue not only internally, but publicly.
Combining the initials of the words Environmental (referring to the environment), Social (referring to people), and Governance (making and enforcing decisions in companies and society), the term has become more widespread recently, mainly due to its connection with sustainability, and the pressing need for companies to demonstrate their concern for this cause.
Due to the urgency of combating climate change, it’s become essential for companies to have specific plans to reduce or at least contain environmental impacts and damage. Since this is such a key topic, the abbreviation has ended up being closely linked to environmental issues. In fact, it has a much broader meaning than just that.
The term ESG deals with sustainable growth as a whole. Before it was possible to “grow” by increasing the company’s profits year after year. Today, increasing only numerical figures is no longer considered evolution. society, the market, and people all demand good practices within sustainable management parameters.
If the “E” is the letter that refers to environmental issues, and the “S” to people, diversity, and human rights, what does the “G” in ESG mean anyway?
What does “G” mean in “ESG” and why is it so important?
The last of the three letters that make up the abbreviation ESG is the one that most raises doubts as to its meaning and application. Basically, it’s essential to understand that without good Governance, it’s not possible to achieve the Environmental and Social objectives, since focus and strategy are needed to best use available resources and achieve the defined goals.
Governance is the name given to the act of governing, defining commitments, assigning them to those responsible, and designing the processes for decision-making in any organization.
This system is responsible for:
- Defining the organization’s values, purposes, and mission
- Evaluating and directing business management towards these objectives
- Discussing and making strategic decisions
- Managing business risks
- Implementing and optimizing policies, internal processes, and controls.
Attributes may vary from one company to another, as they depend on the size of the business, and in which area it operates. But to ensure that all these processes are structured and followed, both ethically and transparently, compliance is a fundamental instrument for the good governance of organizations regarding all these pillars.
Compliance and Corporate Governance walk hand in hand
There’s generally a lot of confusion about the actual attributes of governance and compliance. Many think they’re the same thing, but they obviously aren’t. However, they are indeed complementary, insofar as compliance is one of the mechanisms of good Governance.
If Governance is the establishment of the entire management system, compliance is an instrument in this system. It ensures that the company operates in line with its vision, mission, and values. Thus, it ensures that processes are implemented to deliver value to customers and generate results for shareholders and stakeholders. All this complyies with laws, regulations, internal rules, and processes—in an ethical, integral, and transparent manner.
In this way, the compliance team works together with employees, leaders, suppliers, and partners, encouraging, inspiring, and accompanying them to make sure that their actions are in accordance with the institution’s position.
Hence, the importance of compliance is intrinsically linked to the creation and maintenance of the company’s reputation and image, acting preventively when structuring the mechanisms of good Governance. It also acts as a “detective” when applying mechanisms to identify, monitor, and correct deviations.
Commitment to ESG at hEDGEpoint
hEDGEpoint is committed to developing all aspects of ESG as part of its strategy. We want to promote best practices through our activities, and the way we do business. Integrity and responsibility are two of the values that are part of our essence, among others such as compassion, diversity, excellence, and innovation. That’s why we do business while taking into account environmental, social, and governance factors. We also continue to think of new ways to contribute by positively impacting the commodity chains which we’re an integral part of.
We’re part of a chain that supports the local development of producers, promotes the safety of their businesses, and best environmental practices based on ESG methods. hEDGEpoint does all this through proper risk management, financial education, and sharing insights that highlight key information about different agricultural and energy sectors.
Compliance is a fundamental part of this process. In order to become a greener company, it’s necessary to comply with environmental legislation and good practices in terms of natural resource management. There are numerous laws and regulations that deal with environmental issues, and today, compliance is a strong ally of defining adequate strategies, while supporting the management of legal and regulatory risks. This is a way of protecting the business so that results are achieved in a safe, sustainable way.
The promotion of practices that value diversity and equity in the work environment is a vital part of hEDGEpoint’s culture. For this, we want to encourage this discussion to go beyond our company and contribute to the development of the entire chain and society.
This is why we promote volunteerism through programa to encourage action in favor of vulnerable communities. Soon, we intend to launch activities related to the fight against hunger, food waste, conscious consumption, sustainable cities, social innovation, and education. Compliance supports the development of this pillar by seeking to ensure mechanisms for the best application of human rights and labor laws, as well as diversity and inclusion practices, in all of the organization’s processes.
Based on the best ESG practices, integrity and responsibility are our essential values, and are fundamental in hEDGEpoint’s relations with all stakeholders: customers, suppliers, partners, external institutions, and employees. To guarantee the practice of these values in our business’s management, Governance brings strict world-class protocols, policies, and a code of conduct, in addition to adequate organizational structure to ensure full compliance with laws and regulations.
To this end, compliance reinforces corporate Governance by preventing, detecting, and correcting illegal conduct and eradicating any practices that are not fully based on our values.
On our website, you’ll find transparent documentation showing clearly who we are and how we act. Click here and check it out or learn more about hEDGEpoint on our website.
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