Understanding ESG: G for Governance

To catch environmental and social sustainable goals, it’s important that corporate decisions and initiatives match with management and organizational set-ups which are equally closed to ethical principles. That’s why the third and last component of ESG is the so-called governance, the set of principles, rules and practices which regulate the life of a company and represent its identity. In Rulmeca, management ethics, as general transparency and equity in corporate decisions, contributes to the achievement of high standards of sustainability.

A matter of risks and opportunities

Social and sustainable actions and initiatives promoted by Rulmeca correspond to a coherent corporate identity which apply the same ethical principles in the management and organization of the company as well. ESG standards entails an internal management of the company made of decisions, strategies and policies related to ethical principles and behaviors and compliant with government regulations and obligations. A good governance mitigates and controls corporate risks minimizing potential scandal and regulatory sanction safeguarding corporate reputation. A less risky company is clearly more attractive and trusting for both internal and external stakeholders, including employees, customers, suppliers and shareholders. Consequently, all of that has a deep and positive impact on corporate performance.

The aspects of governance

Many factors determine the assessment of corporate governance according to ESG standards. A positive governance basically concerns transparency in corporate decisions, social and legal responsibility in the application of law and contrast to any form of corruption. Actually, these values are revealed by specific aspects of the whole and complex decision-making process of a company. First, social values need to be embodied by upper management running the company through an equitable composition of board of directors and supervisory authorities. From ESG perspective, the appointment process, as well as dynamics about executive compensation and career promotion need to occur in transparency and according to policies of meritocracy and gender and cultural parity. A diverse board offers wider perspectives, encourage innovation and better reflects the values of the community. Good governance also extends to a company’s responsibility towards stakeholders, both internal and external ones. To this end, transparent relationships, respect of individual rights, fair tax strategy, data privacy and protection with no information disclosure, precise accounting and regular auditing are some of the essential conditions to consider and guarantee to avoid any legal problem or financial loss and preserve business reputation, revenue and longevity.

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