The Procurement Glossary » Environmental, Social & Governance (ESG)

Environmental, Social & Governance (ESG)

Compliance & Risk

Also known as: ESG

Definition

A framework for assessing an organisation's environmental, social and governance performance.

Explanation

ESG has become central to procurement: buyers assess and report on suppliers' ESG credentials, and supply chains dominate many firms' environmental and social footprints. Poor supplier ESG is a growing financial and reputational risk.

Example

Suppliers now complete an ESG questionnaire, and their scores feed the sourcing decision.

Related terms

• Sustainable Procurement — Buying in a way that minimises environmental harm and maximises social and economic benefit over the whole life cycle.
• Corporate Social Responsibility (CSR) — A company's commitment to operate ethically and contribute positively to society and the environment.
• Scope 3 Emissions — Indirect greenhouse-gas emissions across a company's value chain, including those from purchased goods and services.
• Supplier Risk — The exposure a buyer faces from a supplier's potential failure — financial, operational, compliance or reputational.

Frequently Asked Questions

What is Environmental, Social & Governance (ESG)?

A framework for assessing an organisation's environmental, social and governance performance. ESG has become central to procurement: buyers assess and report on suppliers' ESG credentials, and supply chains dominate many firms' environmental and social footprints. Poor supplier ESG is a growing financial and reputational risk.

Can you give an example of Environmental, Social & Governance (ESG)?

Suppliers now complete an ESG questionnaire, and their scores feed the sourcing decision.

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