ESG 3_Governance

[G;Governance ⓒESG.ONL/ESG Today]

ESG is an acronym created from the first letters of Environmental, Social, and Governance. Until now, key standards for evaluating business value were quantitative metrics and financial performance, such as financial statements. However, ESG is an index designed to examine what enables long-term, sustainable corporate operations. Driven by a global recognition that metrics determining enterprise perception and investment direction can no longer be limited to financial performance, it demands attention to the actual environment surrounding companies. In fact, renowned international credit rating agencies such as Moody’s, Fitch, and Standard & Poor’s have included ESG criteria when assessing corporate credit since 2019.  As highlighted by the widely used phrase 'ESG Management', ESG serves as three core non-financial indicators—Environment, Social, and Governance—that will act as important benchmarks for stably enhancing the financial value of companies and their businesses over the mid-to-long term.  

The 'G' in ESG stands for Governance. Corporate governance refers to the operational structure of a company, including internal decision-making systems, relationships between management and shareholders, and the functions of the board of directors and auditors. Until now, companies operated with the primary goal of maximizing shareholder value. However, as corporations began incorporating sustainability alongside their essential duties, corporate governance became a fundamental pillar of ESG. Under the ESG framework, companies are expected to protect shareholder rights, fulfill their social responsibilities through transparent governance, and earn the trust of society members by adhering to business ethics during corporate operations.