Question

Think about eh three dimensions of ESG environmental, Social and governance. What is the best way to measure a firm’s performance along these dimensions? Can you think of two measures for each dimension?

 

Answer 1

answer-

The best way to measure a Firm's performance along with these three dimensions are-

Environmental-

The first measure which we can use is Company's carbon footprints. This includes how a company is taking initiatives to reduce its carbon footprints. For example- initiating energy conservation rules, use of clean energy in its business, etc.

The Second measure which we can use is Company's treatment towards animals. Animals are an essential part of the environment so its activities are not affecting or harming animals in business conduct.

Other measures could be like waste, pollution, natural resource conservation.

Social dimension-

The first measure which we can use in the social dimension is Relationship of The firm with its suppliers. Suppliers play very an important role in the production and sales of the company. If company has a good relationship with suppliers then it gets low price supplies on the right time and make sales which bring more profit.

The second measure is How companies benefit society. This include the donation, charity, Customers, public, etc. For example- Company donates $2 million in society for food for the poor during Corona Pandemic lockdown situation.

Other measures could be a relationship with employees, customers, government etc.

Governance-

Transparency is the first measure because any investor would want to work with such company which is transparent and honest in it's business. They can show it with transparent accounting practices.

legally doing business is the second measure where A company which pays taxes on time, do business legally by following laws of the country then it is a sign of a well-governed company.