What is Lean Management?
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In this article, we’ll explain what lean management is, the five principles, and how your company can get started with lean management.
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ESG criteria: what you need to know
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A company’s success is no longer judged by profit alone. Investors, regulators, and consumers are paying closer attention to ESG criteria - the environmental, social, and governance factors that shape how businesses operate. Strong ESG performance can build trust, attract investment, and even improve financial resilience. But meeting these criteria isn’t just about ticking boxes; it requires real, measurable action.
Companies that take ESG criteria seriously are finding that the benefits go beyond compliance. From reducing risk to driving innovation, integrating ESG into business strategy can create long-term value in ways that aren't always obvious at first glance.
So what exactly do ESG criteria involve, and how do they impact businesses? Let’s take a closer look.
What is ESG?
“ ESG stands for Environmental, Social, and Governance - three key factors used to evaluate a company's broader impact beyond financial performance. Instead of just measuring profits through traditional financial analysis, ESG criteria assess how a business manages environmental responsibility, social impact, and corporate governance. ”
Companies that take ESG seriously aren’t just following trends, they’re working toward long-term sustainability, enhancing environmental sustainability, and building trust with investors, employees, and customers.
Strong ESG performance doesn’t just benefit businesses, it also creates value for society, shaping the way companies interact with their stakeholders, from local communities to global markets.
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Why ESG matters
ESG has gone from a niche concern to a major force shaping business decisions. Today, it influences how consumers shop, where employees want to work, and where investors put their money. Companies that prioritise ESG are positioning themselves for long-term success.
Consumers care about ESG:
Did you know that sustainability is a selling point? A McKinsey survey found that products making ESG-related claims grew 28% over five years, compared to 20% for those without. Consumers are increasingly choosing brands that align with their values, whether that means responsible sourcing, lower emissions, or ethical labor practices.
Employees want purpose-driven workplaces:
Workers today are looking for more than just a paycheck - they want to be part of companies that reflect their values. A PwC survey found that:
- 68% of job seekers consider environmental policies when evaluating job offers.
- 66% look at governance policies.
- 75% care about a company’s overall societal impact.
Companies with strong ESG commitments tend to attract and retain talent more effectively, boosting engagement and reducing turnover.
Investors are paying attention:
ESG isn’t just about reputation, it’s about risk and long-term value. More than 90% of S&P 500 companies and 70% of Russell 1000 companies now publish ESG reports, reflecting a growing demand for transparency. Investors see ESG as a measure of resilience, helping businesses navigate regulatory shifts, reputational challenges, and evolving market expectations.
What are ESG criteria?
“ ESG criteria are the standards used to assess how a company operates and the impact it has on the world. They fall into three key categories: Environmental, Social, and Governance. ”
Environmental criteria: Addressing climate and sustainability challenges
The environmental aspect of ESG has gained significant attention, driven largely by growing concerns over climate change, pollution, and resource depletion. Businesses are under increasing pressure to reduce their environmental footprint, not just for regulatory compliance but to meet the expectations of investors, customers, and the wider community.
In addition to helping the planet, companies that integrate strong environmental policies into their business strategies are building long-term resilience and reducing financial risks linked to resource shortages, extreme weather events, and shifting regulations.
Some key areas covered under environmental ESG criteria in
| ESG Criteria | Description |
|---|---|
| Climate change | Reducing carbon emissions, investing in renewable energy, participating in carbon offset programs, and setting science-based targets. |
| Energy efficiency | Cutting energy consumption through efficiency upgrades, smart energy management, and green technologies. |
| Water management | Addressing water scarcity by recycling water, improving water-use efficiency, and protecting watersheds. |
| Pollution control | Reducing air and water pollution by using non-toxic materials, installing pollution control systems, and adhering to environmental regulations. |
| Waste and resource management | Minimising waste, promoting recycling, and transitioning to a circular economy model. |
| Deforestation prevention | Preventing deforestation, promoting sustainable forestry, and supporting conservation efforts. |
| Biodiversity protection | Preserving ecosystems, protecting endangered species, and promoting responsible land use. |
Social ESG criteria: How companies impact people
The social aspect of ESG focuses on how a company interacts with people - its employees, customers, suppliers, and the wider community. Strong social policies help businesses foster inclusivity, fairness, and ethical responsibility, creating positive ripple effects across entire industries.
These criteria influence every part of a company, from boardroom decisions to working conditions in supply chains. And it’s not just employees who are affected, customers, investors, and local communities all benefit when businesses commit to responsible social practices.
Some key areas covered under social ESG criteria include:
| ESG Criteria | Description |
|---|---|
| Human rights observance | Ensuring ethical and fair treatment for all individuals, both within the company and across supply chains. |
| Compliance with labor standards | Upholding fair wages, safe working conditions, and employee rights in line with regulations. |
| Customer satisfaction measures | Actively improving customer experience through feedback, quality service, and responsible business practices. |
| Data protection and privacy safeguards | Safeguarding personal data through strong security policies and compliance with privacy laws. |
| Promotion of gender equality and diversity | Promoting workplace equality, supporting underrepresented groups, and ensuring diverse leadership. |
| Employee engagement strategies | Encouraging workplace involvement, fostering motivation, and creating a positive culture. |
| Community relations initiatives | Building strong local relationships by investing in education, social programs, and environmental initiatives. |
Governance: Central to ethical business practices
Governance is the backbone of ESG, shaping how a company is run and ensuring it operates with integrity, accountability, and transparency. It covers everything from leadership structures and financial reporting to executive pay and ethical decision-making. Strong governance policies help prevent corporate misconduct, such as fraud, bribery, and conflicts of interest, while fostering trust among investors, employees, and the public.
Good governance instills a culture of fairness and accountability. Companies with clear policies, diverse leadership, and rigorous oversight mechanisms are better equipped to manage risks, make sound decisions, and build long-term success.
Some key governance ESG criteria include:
| ESG Criteria | Description |
|---|---|
| Executive pay | Ensuring fair, transparent compensation that aligns with the company’s long-term goals. |
| Board composition and diversity | Maintaining a balanced board with diverse backgrounds, skills, and perspectives to strengthen decision-making. |
| Anti-bribery and corruption measures | Implementing strict measures to prevent fraud, bribery, and unethical business practices. |
| Lobbying regulations | Adhering to ethical standards in lobbying activities, ensuring accountability in corporate influence. |
| Oversight of political contributions | Regulating political donations to prevent conflicts of interest and maintain ethical business practices. |
| Implementation of whistleblower schemes | Providing secure, anonymous channels for employees to report unethical or illegal behavior without fear of retaliation. |
| Audit committee structure and functioning | Establishing strong audit committees to uphold transparency, compliance, and sound financial practices. |
Is ESG reporting mandatory?
“ ESG reporting is becoming increasingly regulated worldwide, though requirements vary by region. Some jurisdictions have introduced mandatory ESG disclosures, while others leave it as a voluntary practice driven by investor expectations and market pressure. ”
Mandatory ESG reporting
Regulations requiring companies to disclose ESG-related data are expanding, particularly in the EU, UK, and US:
European Union (EU)
The EU has some of the world's most advanced ESG reporting requirements, designed to push businesses toward greater sustainability and transparency. Key regulations include:
Corporate Sustainability Reporting Directive (CSRD)
This regulation significantly expands ESG reporting requirements, applying to around 50,000 companies across the EU. Large companies (meeting two of the following: €50M+ turnover, €25M+ balance sheet, 250+ employees) and listed SMEs must report detailed sustainability information using the European Sustainability Reporting Standards (ESRS).
Sustainable Finance Disclosure Regulation (SFDR)
Requires financial market participants to disclose how ESG factors influence investment decisions and ensure transparency in sustainable investments.
EU Taxonomy
Establishes a classification system for environmentally sustainable economic activities, helping companies and investors align with the EU’s climate goals.
United Kingdom (UK)
The UK does not have a single ESG reporting law but enforces several regulations requiring businesses to disclose environmental and social impacts.
Companies Act 2006
Under the Companies Act 2006 medium and large companies must disclose principal risks and uncertainties in their directors’ report, including environmental and social risks if relevant. Section 172 statements require large companies to report on stakeholder engagement, including supply chain and environmental impact.
Streamlined Energy & Carbon Reporting (SECR)
Large companies, LLPs, and quoted companies must report UK energy use, emissions, and efficiency actions in their directors' report. SECR applies to businesses with a turnover of £36M+, a balance sheet of £18M+, or 250+ employees.
Climate-related Financial Disclosures (CRFD) & TCFD
Since April 2022, large UK companies and LLPs (500+ employees, £500M+ turnover) must report on climate risks, governance, and emissions strategies. Listed companies must also comply with TCFD-aligned reporting.
Corporate Sustainability Reporting Directive (CSRD) – Impact on UK Companies
From 2026, UK businesses with €150M+ turnover in the EU or large EU subsidiaries will be subject to CSRD reporting requirements, including value chain disclosures and ESG audits.
United States (US)
The US lacks a single, unified ESG reporting framework, but regulatory pressure is increasing.
SEC Climate Disclosure Rule (proposed)
The US Securities and Exchange Commission (SEC) is finalising rules that would require publicly traded companies to disclose climate-related risks, greenhouse gas emissions (Scopes 1, 2, and in some cases 3), and sustainability strategies.
State-Level Regulations
Certain states, such as California, have introduced stricter ESG requirements. The California Climate Corporate Data Accountability Act will require companies doing business in the state (with $1B+ in revenue) to report their full emissions footprint (Scopes 1, 2, and 3).
ESG Regulations for Investors
The Department of Labor allows ESG factors to be considered in retirement investment decisions, influencing how pension funds and asset managers evaluate ESG risks.
While ESG reporting remains mostly voluntary at the federal level, growing regulatory efforts and investor pressure are pushing US companies toward greater transparency.
Non-mandatory ESG reporting
In many countries, ESG reporting is not legally required, but companies voluntarily disclose ESG performance to meet investor expectations, enhance transparency, and improve sustainability practices.
Common voluntary ESG reporting frameworks include:
| Framework | Focus Area | Who Uses It? |
|---|---|---|
| GRI (Global Reporting Initiative) | Broad ESG reporting across industries | Companies worldwide |
| SASB (Sustainability Accounting Standards Board) | Industry-specific ESG disclosures | Primarily US-based companies |
| CDP (Carbon Disclosure Project) | Climate, water, and deforestation reporting | Companies, cities, and investors globally |
| UN PRI (Principles for Responsible Investment) | ESG-focused investment principles | Institutional investors |
| TCFD (Task Force on Climate-related Financial Disclosures) | Climate-related risk and governance reporting | Banks, insurers, asset managers |
| ISO 14001 | Environmental management systems | Businesses focusing on sustainability |
Even when not legally required, ESG transparency is increasingly expected by investors, consumers, and regulators. Many large companies now publish annual ESG reports to track progress on climate action, social impact, and governance. ESG rating agencies like MSCI, Morningstar, and Bloomberg also assess companies’ ESG performance, influencing investor decisions.
What is the difference between ESG and CSR?
Environmental, Social, and Governance (ESG) and Corporate Social Responsibility (CSR) are both concepts that address the ethical and sustainable practices of a company, but they differ in terms of their scope, focus, and application.
| Aspect | Corporate Social Responsibility (CSR) | Environmental, Social, and Governance (ESG) |
|---|---|---|
| Definition | A company’s voluntary commitment to ethical and responsible business practices. | A set of measurable criteria used to assess a company’s environmental, social, and governance impact. |
| Scope & Focus | Broad and value-driven, focusing on philanthropy, volunteer work, and community engagement. | Data-driven and standardised, focusing on risk management, sustainability, and financial impact. |
| Application | Implemented through company-led initiatives such as donations, ethical supply chain. | Used by investors, regulators, and stakeholders to evaluate company performance based on measurable sustainability metrics. |
| Measurement | Subjective and varies by company - often communicated through marketing and sustainability reports. | More structured - follows recognised reporting frameworks like GRI, SASB, TCFD, and CDP. |
| Investor Relevance | Not typically factored into investment decisions. | Widely used in investment decision-making to assess long-term risks and financial sustainability. |
“ CSR reflects a company’s voluntary ethical stance, while ESG provides a standardised, measurable framework for assessing sustainability risks and performance. ”
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How does ESG criteria relate to investing?
ESG investing has seen a significant rise in popularity, reflecting a shift in how investors assess risk and long-term value. According to the Global Sustainable Investment Alliance, as of 2022, $30.3 trillion USD is invested globally in sustainable assets and socially responsible investments, with a 20% increase in non-US markets since 2020.
This impressive growth isn't just a trend, it highlights the growing awareness that companies with strong ESG performance often present lower investment risk, stronger returns, and long-term resilience. Responsible investing takes ESG criteria into account to ensure that capital is directed toward businesses that align with ethical, environmental, and governance principles, making it a critical factor in portfolio management.
Numerous studies have demonstrated the financial relevance of ESG investing. For example, Morningstar’s 2019 study found that 73% of its 56 ESG indexes (41 in total) outperformed their non-ESG counterparts. This is why ESG-themed ETFs (Exchange-Traded Funds), socially responsible investing, and impact investing strategies have gained traction among institutional investors seeking exposure to companies with high ESG ratings.
The emphasis on ESG investing reflects a broader transformation from passive to active investment strategies. ESG investing focuses on a range of approaches that allow investors to align financial goals with sustainability objectives, including:
- Negative screening: Excluding companies that fail to meet ESG standards, such as fossil fuel companies or firms with poor labor practices.
- Sustainable investing: Actively selecting investments based on ESG performance and alignment with sustainability goals.
- Shareholder activism: Investors use proxy voting and direct engagement to push companies toward stronger ESG policies.
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ESG investing challenges
While ESG investing has become mainstream, it still faces challenges, primarily around data quality and consistency. For ESG to be fully integrated into the investment process, companies need to provide clear and standardised ESG disclosures that investors can use to assess long-term risk and opportunity.
Some of the biggest challenges in ESG investing include:
- Lack of consistent ESG disclosures: Many companies report selectively, making it difficult to compare ESG performance across industries.
- Data gaps in environmental impact: Investors need clear carbon emissions data, energy efficiency metrics, and biodiversity commitments, yet these are often missing or inconsistent.
- Varying governance standards: Transparency in executive pay, board diversity, and corporate ethics can differ significantly between companies and regions.
Despite these challenges, ESG criteria remain an important tool for investors to evaluate long-term risk and sustainability performance. The shift toward responsible investment demonstrates that businesses integrating ESG principles into their strategy are more resilient, competitive, and financially viable in the long run.
How can ESG create value for companies?
“ ESG is shaping how companies grow, compete, and stay profitable. It’s about unlocking growth, efficiency, and long-term resilience. Companies that take ESG seriously gain a competitive edge, reduce costs, strengthen stakeholder relationships, and attract top talent. ”
Let’s break down the key ways ESG drives value:
Core business growth and competitive advantage
Consumers and investors are actively seeking businesses that align with sustainability values. A McKinsey survey found that 70% of consumers would pay 5% more for products from companies with strong green practices, making ESG a direct driver of revenue and brand loyalty.
| How ESG Helps | What It Means for Businesses |
|---|---|
| Market expansion | ESG-aligned companies can tap into sustainable markets, attracting eco-conscious consumers and investors. |
| Stronger brand positioning | Businesses that integrate sustainability into their core offerings differentiate themselves in competitive industries. |
| Innovation & efficiency | ESG encourages life cycle analysis and process improvements, helping companies design more sustainable products and reduce inefficiencies. |
| Cross-industry benefits | Even high-impact sectors like mining and steel can use ESG strategies to build public trust and manage regulatory risks. |
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Cost savings through sustainability
Reducing waste and optimising energy use aren’t just environmental wins, they’re financial wins. ESG-driven efficiency strategies help companies lower operating costs and prevent resource waste, directly improving their bottom line.
| How ESG Helps | What It Means for Businesses |
|---|---|
| Lower operational costs | Sustainable practices like energy efficiency, waste reduction, and resource optimisation reduce long-term expenses. |
| Minimised waste | Identifying inefficiencies in waste streams (water, materials, unsold products) helps businesses recover lost value. |
| Circular economy benefits | Redesigning products to incorporate recycled materials cuts costs while conserving natural resources. |
Regulation and compliance
Regulatory pressures around ESG are increasing, and businesses that fail to adapt could see significant financial consequences. McKinsey estimates that up to a third of corporate profits could be at risk due to evolving ESG-related regulations.
| How ESG Helps | What It Means for Businesses |
|---|---|
| Proactive regulatory adaptation | ESG helps businesses stay ahead of evolving regulations, reducing legal risks. |
| Lower compliance costs | Early ESG integration minimises litigation risks, regulatory fees, and penalties. |
| Sector-specific impact | Industries like banking, defense, and tech - which often rely on government funding - can see 50-60% of their operations impacted by regulatory shifts. |
Employee attraction, motivation and retention
A strong ESG commitment helps companies attract and retain top talent. Employees today want to work for organisations that align with their values, and businesses with ethical, sustainable practices often see higher engagement and lower turnover.
| How ESG Helps | What It Means for Businesses |
|---|---|
| Enhanced employer brand | Companies with strong ESG commitments stand out in competitive job markets, making it easier to attract skilled talent. |
| Higher employee satisfaction | Employees are more engaged and motivated when they see their company making a real social or environmental impact. |
| Stronger financial performance | Research shows that businesses with positive workplace cultures - like those on Fortune's “100 Best Companies to Work For” list - consistently outperform market averages. |
Why ESG criteria are no longer optional
ESG criteria have moved from voluntary commitments to essential business benchmarks, shaping how companies are assessed by investors, consumers, and regulators. Businesses that fail to integrate environmental, social, and governance criteria risk falling behind as sustainability and ethical business practices become core expectations, not optional extras.
The impact is already clear:
- Regulatory pressure is increasing: Governments worldwide are making ESG criteria a legal requirement, mandating disclosures on carbon emissions, supply chain ethics, and corporate governance practices. Companies that proactively meet these expectations avoid fines and gain regulatory goodwill.
- Consumers expect transparency: 70% of consumers say they’re willing to pay more for sustainable products, meaning businesses that meet strong ESG criteria stand to gain a competitive advantage in brand loyalty and market share.
- Investors are using ESG criteria to assess risk and value: ESG ratings help investors identify companies with strong sustainability performance. Factoring ESG considerations into investment decisions allows investors to evaluate both financial and non-financial risks, ensuring long-term resilience and profitability.
ESG criteria are essential to business resilience, risk management, and future-proofing in an evolving global economy. Companies that embed ESG into their strategy today will be the industry leaders of tomorrow.
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How can Greenly help your company?
Greenly offers practical solutions to help your business measure ESG criteria and adopt sustainable practices. Here's how Greenly can make a difference:
Measure your GHG emissions
- Measure Scope 1, 2, and 3 emissions: Understand your greenhouse gas emissions across all scopes to know exactly where you stand.
- Advanced technology: Use the latest tools to measure your carbon footprint, analyse emissions, and set realistic reduction targets.
Custom action plans
- Expert support: Work with Greenly's climate experts to develop tailored action plans that fit your business goals and sustainability targets.
- Seamless assessment: Look at both physical and monetary flows to gain a comprehensive understanding of your emissions and identify key areas for improvement.
Decarbonise your supply chain
- Supplier engagement: Collaborate with your suppliers to cut carbon emissions throughout your supply chain.
- Sustainable sourcing: Identify and replace wasteful suppliers with low-carbon alternatives, building greener partnerships.
- Scope 3 emissions: Achieve greater transparency and manage Scope 3 emissions effectively, which often make up the largest part of a company's carbon footprint.
- Transition plans: Work with suppliers to create and implement transition plans aimed at reducing emissions across the board.
Intuitive and seamless platform
- Streamlined interface: Use Greenly's intuitive platform to calculate and monitor your business's carbon footprint, making the carbon assessment process flow smoothly.
With Greenly's help, your business can significantly reduce its environmental impact, meet ESG goals, and enhance sustainability, all while making smart business decisions. Get in touch with us today to find out more.
Sources:
- Greenly, What is ESG Reporting and Should You Be Doing It?, https://greenly.earth/en-gb/blog/company-guide/what-is-esg-reporting-and-should-you-be-doing-it
- McKinsey & Company, Consumers Care About Sustainability—And Back It Up with Their Wallets, https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/consumers-care-about-sustainability-and-back-it-up-with-their-wallets
- Greenly, Carbon Emissions: What You Need to Know, https://greenly.earth/en-gb/blog/ecology-news/carbon-emissions-what-you-need-to-know
- PwC, PwC’s Global Workforce Sustainability Study, https://www.pwc.com/gx/en/issues/workforce/pwcs-global-workforce-sustainability-study.html
- McKinsey & Company, Does ESG Really Matter—And Why?, https://www.mckinsey.com/capabilities/sustainability/our-insights/does-esg-really-matter-and-why
- Greenly, Does Transparency Benefit or Harm Your Company?, https://greenly.earth/en-gb/blog/company-guide/does-transparency-benefit-or-harm-your-company
- Greenly, Climate Change in 2022: Where Do We Stand?, https://greenly.earth/en-gb/blog/ecology-news/climate-change-in-2022-where-do-we-stand
- Greenly, What is ESG Data and How to Use It?, https://greenly.earth/en-us/blog/company-guide/what-is-esg-data-and-how-to-use-it
- Greenly, Our Guide to the CSRD’s Double Materiality Assessment, https://greenly.earth/en-gb/blog/company-guide/our-guide-to-the-csrds-double-materiality-assessment
- Greenly, Our Guide to European Sustainability Reporting Standards (ESRS), https://greenly.earth/en-gb/blog/company-guide/our-guide-to-european-sustainability-reporting-standards-esrs
- Greenly, What is the Sustainable Finance Disclosure Regulation (SFDR)?, https://greenly.earth/en-gb/blog/company-guide/what-is-the-sustainable-finance-disclosure-regulation-sfdr
- Greenly, What is the EU Taxonomy?, https://greenly.earth/en-gb/blog/company-guide/what-is-the-eu-taxonomy
- Greenly, UK Companies Act 2006: Objectives and Environmental Concerns, https://greenly.earth/en-gb/blog/company-guide/uk-companies-act-2006-objectives-and-environmental-concerns
- Greenly, SECR Reporting: All You Need to Know, https://greenly.earth/en-us/blog/company-guide/secr-reporting-all-you-need-to-know
- Greenly, TCFD Standards: All You Need to Know, https://greenly.earth/en-gb/blog/company-guide/tcfd-standards-all-you-need-to-know
- Greenly, What is the Climate Disclosure Rule Proposed by the SEC?, https://greenly.earth/en-gb/blog/ecology-news/what-is-the-climate-disclosure-rule-proposed-by-the-sec
- Greenly, Greenhouse Gas Emissions: Scopes 1, 2, and 3, https://greenly.earth/en-gb/blog/company-guide/greenhouse-gas-emissions-scopes-1-2-and-3
- Greenly, CSR Meaning: All You Need to Know, https://greenly.earth/en-us/blog/company-guide/csr-meaning-all-you-need-to-know
- Greenly, Why Should Investors Consider ESG Companies?, https://greenly.earth/en-us/blog/industries/why-should-investors-consider-esg-companies
- Global Sustainable Investment Alliance (GSIA), Global Sustainable Investment Review: $30 Trillion Invested in Sustainable Assets, https://www.gsi-alliance.org/global-sustainable-investment-review-finds-us30-trillion-invested-in-sustainable-assets/#:~:text=%2430.3%20trillion%20is%20invested%20globally,increased%20by%2020%25%20since%202020
- McKinsey & Company, How Much Will Consumers Pay to Go Green?, https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Sustainability/Our%20Insights/How%20much%20will%20consumers%20pay%20to%20go%20green/How_much_will_consumes_pay_to_go_green.pdf
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