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ESG analysis is increasingly used by many responsible investors as a way to determine the long-term success of a company.
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Typically considers the impact of the company on the environment and how it manages its carbon footprint.
Resource Management: Use of natural resources like water, energy, and raw materials.
Pollution and Waste: How the company handles waste, emissions, and pollution, including initiatives for recycling and waste reduction.
Biodiversity: The impact of the company’s operations on natural habitats and ecosystems.
Focuses on how a company manages its relationships with people, including employees, customers, suppliers, and the communities in which it operates.
Labour Practices: Employee treatment, including working conditions, wages, health and safety, and diversity and inclusion.
Human Rights: Ensuring that the company does not engage in or support exploitative practices, such as child labour or human trafficking.
Community Impact: Contribution to the welfare of the communities it operates in, including philanthropy and volunteer work.
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Refers to the internal system of practices, controls, and procedures that a company adopts to govern itself, make effective decisions, comply with the law, and meet the needs of external stakeholders.
Board Composition: Diversity, independence, and qualifications of the board of directors.
Ethical Conduct: The company's commitment to ethical behavior, including anti-corruption measures and adherence to laws and regulations.
Transparency: Openness in financial reporting, executive compensation, and disclosure of risks.
As legislation is changing and becoming ever more strict in terms of what damage companies are allowed to do, these principles are becoming more of an indicator of the long-term lifespan of a company, and its ability to prosper in the future.
Investors and financial institutions increasingly prioritise ESG factors. Solid sustainability credentials will make attracting investment and securing favourable lending terms easier relative to the competition.
A commitment to sustainability builds a positive corporate image and enhances brand value. Companies known for ethical and sustainable practices attract loyal customers, build trust, and foster long-term relationships. This is especially pertinent to increasingly eco-conscious younger audiences.
There is a growing demand for sustainably produced goods. Precious metal manufacturers incorporating ethical and eco-friendly practices can cater to consumers' ever-increasing demand for responsibly sourced jewellery and products.
Non-compliance with environmental regulations can lead to legal actions and lawsuits. Companies may face liabilities for ecological damages, health issues, or non-disclosure of environmental impacts.
Sustainable practices can initially require investment in new technologies or processes; however, in the long run, not adopting these practices may lead to higher operational costs due to resource inefficiencies, waste disposal, and energy consumption. Generally, a 20% -30% increase in operational efficiency can be achieved.
ESG practices contribute to the long-term viability of manufacturing companies by addressing societal challenges, ensuring resilience in the face of global changes, and securing a social license to operate.
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