Due to recent climate changes, social catastrophes, and lack of corporate accountability; measures have been taken to help better evaluate corporate activity. The environmental, social, and corporate governance report illustrates the societal impact of a businesses activity through the evaluation of all three criteria.
Corporate activity in some cases produces externalities that are harmful to the environment. Various industry production models exemplify this fact such as meat and food production. The goal of the environmental part of the ESG reports is to label how a firm's activity is affecting the environment. Which in turn allows investors to make better decisions.
Today's global economy is driven by capitalism and the ownership of property, hence, corporations have an immense impact on society. The social section of the ESG report examing the social impact of a firm's activity with regards to how it affects employees, the common citizen, and consumers.
Corporate governance is a system of policies, rules and practices that determine how a company's board of directors manages and oversees the operations of a company; it consists of the principles of transparency, accountability, and security. The ESG report enlists a firms corporate governance standards which in turn can allow an investor to project the future financial performance of the firm.