ESG
Information grouped into three topic areas.
ESG explained · the term
What is ESG
ESG groups information about the natural world, people and the way an organisation is governed.
The meaning
What ESG stands for, letter by letter
ESG groups information about the natural world, people and the way an organisation is governed.
Environmental, social and governanceRequirements and evidence
Module 01 / 03
Environmental
Energy, emissions, resources and nature.
Module 02 / 03
Social
Workers, customers, suppliers and communities.
Module 03 / 03
Governance
Oversight, conduct, controls and accountability.
Read the detailed guidance and evidence
ESG stands for environmental, social and governance: three groups of issues, named together in a 2004 investment report, Who Cares Wins, that now organise how companies disclose their non-financial information.
UK law seldom uses the acronym, but the Companies Act lists the same things by name.
ESG stands for environmental, social and governance.
Environmental covers what a company takes from and puts into the natural world: energy, emissions, water, materials, waste and its effect on nature.
Social covers the people it deals with: its employees, the workers in its supply chain, its customers and the communities around it.
Governance covers how it is run: who on the board is accountable, how risk is controlled, how pay is set, and whether bribery and corruption are prevented.
The closest UK law comes to a definition is section 414CB(1) of the Companies Act, which asks certain large companies to report on five matters that map onto the three letters.
Each pillar is broken down, with the UK duty or standard that asks about it, on the ESG pillars.
| Letter | What it covers | The UK statute’s words |
|---|---|---|
| E — environmental | Emissions, energy, resources, water, waste, pollution, nature | “environmental matters (including the impact of the company’s business on the environment)” |
| S — social | Employees, pay, health and safety, supply chains, human rights, communities | “the company’s employees”, “social matters”, “respect for human rights” |
| G — governance | Board oversight, ethics, pay, risk, controls, transparency | “anti-corruption and anti-bribery matters” |
Worked answer
What turns an ESG topic into a useful measure?
“Social” names a topic area; a useful workforce disclosure also tells the reader the population, period, calculation and decision the measure supports.
| Part of the example | Situation | Useful response |
|---|---|---|
| Illustrative calculation | A fictional business records 12 leavers and an average workforce of 120 during one year. | 12 ÷ 120 × 100 gives a 10% illustrative turnover rate. |
| Boundary | The example includes employees and excludes agency workers. | Say so, instead of presenting the percentage as covering everyone who works for the business. |
| Interpretation | The board wants to understand retention in a hard-to-recruit role. | Look at the relevant workforce segment and causes before drawing a conclusion from the overall rate. |
The figures and turnover formula are an editorial illustration, not a prescribed UK SRS metric or a benchmark for good performance.
PopulationA fictional decision trace
Module 01 / 03
Population
Define the denominator.
Module 02 / 03
Calculation
Make the method repeatable.
Module 03 / 03
Decision
Explain why the information is useful.
The origin
Where the term came from: Who Cares Wins, 2004
The 2004 Who Cares Wins report helped establish ESG as a way to consider these matters in investment practice.
An investment framingRequirements and evidence
Module 01 / 03
Analysis
Consider financially relevant environmental and social matters.
Module 02 / 03
Investment
Connect the information to decisions and risk.
Module 03 / 03
Reporting
Make the relevant information visible to users.
Read the detailed guidance and evidence
The phrase “environmental, social and governance issues” was set out in Who Cares Wins, a report published in December 2004.
It came from a joint initiative of financial institutions invited by UN Secretary-General Kofi Annan, who wrote to the heads of 55 of them in January 2004.
Twenty took part, from nine countries, and the recommendations — on integrating these issues into analysis, asset management and brokerage — were the industry’s own, not the United Nations’.
The Principles for Responsible Investment, also convened by the Secretary-General and written by institutional investors, turned the idea into six commitments, the first of which is to incorporate ESG issues into investment analysis.
The UN Global Compact’s Ten Principles for companies cover human rights, labour, the environment and anti-corruption — the same ground, framed as responsibilities rather than risks.
That difference in framing is the root of the difference between ESG and CSR, set out on ESG vs CSR.
- Jan 200401
Kofi Annan writes to financial institutions
Invitation to the heads of 55 institutions.
- Dec 200402
Who Cares Wins published
Twenty institutions from nine countries.
- Later03
Principles for Responsible Investment
Six principles for incorporating ESG issues into investment.
- 25 Feb 202604
UK SRS S1 and S2 published
The UK’s sustainability reporting standards.
In the UK
How UK law and the FCA use the words
UK ESG-related reporting comes through separate company, energy and financial-services rules rather than one universal ESG law.
One phrase, several UK dutiesRequirements and evidence
Module 01 / 03
Company reporting
Check entity and size-based reporting duties.
Module 02 / 03
Energy
Check SECR and ESOS separately.
Module 03 / 03
Financial services
Check the FCA and other applicable rules.
Read the detailed guidance and evidence
No single UK law is called an ESG law; the duties are spread across company, energy, employment and modern slavery legislation.
The Companies Act’s directors’ duty in section 172(1) already asks directors to have regard to employees, suppliers and customers, the community and the environment, and high standards of business conduct.
The UK’s standards avoid the acronym too: UK SRS S1 and S2, published on 25 February 2026, ask about sustainability-related risks and opportunities.
UK SRS S1 keeps only what could reasonably be expected to affect a company’s cash flows, access to finance or cost of capital — financial materiality — so an ESG topic appears in a UK SRS report only if it passes that test.
UK SRS S2, the climate standard, is the UK’s version of IFRS S2; the FCA’s final rules put listed companies in scope on a comply-or-explain basis from 2027, and everyone else may use it voluntarily.
How the topics pass the test is on ESG integration under UK SRS; the full list of UK duties is on ESG reporting requirements UK, and the sister reference is uksrs.org.uk.
Where the acronym does appear
The FCA’s rulebook has an ESG sourcebook; its anti-greenwashing rule, ESG 4.3.1R, has applied to all authorised firms since 31 May 2024.
And the ESG Ratings Order 2025 makes providing an ESG rating a regulated activity from 29 June 2028.
Frequently asked
What is ESG: frequently asked
What does ESG stand for?
ESG stands for environmental, social and governance — three groups of issues used to judge how a company affects, and is affected by, the natural world, the people it deals with, and the way it is run.
What is ESG in simple terms?
ESG is a way of looking at a company beyond its profit and loss: its emissions and use of resources (environmental), its treatment of employees, suppliers and communities (social), and how its board is organised and held to account (governance).
Investors use it to judge risk; companies use it to organise what they report.
Where did the term ESG come from?
It was set out in Who Cares Wins, a report published in December 2004 by twenty financial institutions from nine countries.
The initiative was convened by the UN Global Compact after Kofi Annan wrote to the heads of leading financial institutions in January 2004, and the recommendations were the industry's own, not the UN's.
What does ESG mean in the UK?
The same three groups of issues, but UK law rarely uses the acronym.
The Companies Act asks certain large companies to report on environmental matters, employees, social matters, respect for human rights and anti-corruption and anti-bribery matters — ESG in all but name.
The FCA's rulebook has an ESG sourcebook, and the UK's standards are called sustainability reporting standards.
Is ESG a legal requirement in the UK?
ESG as such is not; specific duties are.
Energy and carbon reporting, modern slavery statements, gender pay gap reports and the Companies Act's climate and non-financial statements are legal requirements for the companies they reach.
The UK Sustainability Reporting Standards are voluntary, and listed companies in scope report against them on a comply-or-explain basis from 2027.
Is ESG the same as sustainability?
Close, but not identical in use.
ESG is the investor's grouping of issues; sustainability is the broader aim, and the word the standards use.
UK SRS asks about sustainability-related risks and opportunities that could affect a company's prospects, which covers the E, S and G topics that are financially material.
Are ESG ratings regulated in the UK?
Not yet.
The ESG Ratings Order 2025 (SI 2025/1349) makes providing an ESG rating a regulated activity from 29 June 2028.
Until then, ESG ratings are unregulated opinions, and a rating is not a regulatory status.
Editorial preparation
Start with who will read it
The intended audience affects which framework and information are useful.
The reader
Investors
Assess sustainability-related financial information.
Stakeholders
Assess significant impacts and how they are managed.
Regulator
Assess the specific legal disclosure package.
Read the detailed guidance and evidence
The intended audience affects which framework and information are useful.
Editorial preparation
Turn a topic into information
A topic label becomes useful when it is supported by a defined measure, method and responsible owner.
- 1
Topic
Identify the question the reader needs answered.
- 2
Evidence
Retain records and explain the boundary.
- 3
Disclosure
Present a supported answer and limitations.
Read the detailed guidance and evidence
A topic label becomes useful when it is supported by a defined measure, method and responsible owner.
Fictional example
A fictional workforce disclosure
A fictional company connects a workforce measure to the population, reporting period and oversight decision.
A fictional workforce disclosureRequirements and evidence
Module 01 / 03
Population
Identify who is included in the measure.
Module 02 / 03
Method
Explain the calculation and period.
Module 03 / 03
Oversight
Explain how the information informs management.
Read the detailed guidance and evidence
A fictional company connects a workforce measure to the population, reporting period and oversight decision.
Editorial preparation
Read the meaning, then the duty
A sensible reading order separates the term, reporting requirements and implementation choices.
- 1
Meaning
Understand the three topic areas.
- 2
Duty
Identify the instrument and population.
- 3
Method
Choose a reporting framework and evidence process.
Read the detailed guidance and evidence
A sensible reading order separates the term, reporting requirements and implementation choices.
Prepare the evidence
What is ESG: from a requirement to a reporting pack
Use this preparation sequence alongside the detailed requirements on this page.
An editorial workflow, not a statutory schedule.
- Stage 0101
Duty map
List the legal, contractual and voluntary requirements that actually apply.
- Stage 0202
Reporting lens
Distinguish financial exposure from impacts and wider stakeholder questions.
- Stage 0303
Accountability
Give each disclosure a responsible owner and a review path.
- Stage 0404
Evidence record
Retain data boundaries, methods and source documents.
- Stage 0505
Framework connections
Reuse evidence where the underlying definitions and boundaries agree.
- Stage 0606
Publication checks
Review the report for unsupported claims, omissions and contradictory statements.
Read the applicable instrument: Who Cares Wins — Connecting Financial Markets to a Changing World, December 2004
A practical brief
An evidence pack, with a clear review trail
Ask for a pack that lets the next reviewer retrace the scope decision, follow the evidence and understand the limitations.
This describes a useful handover; it does not certify compliance or establish that a vendor or adviser delivers it.
Trace the answerScope → evidence → review
Module 01 / 04
Applicability record
Write down the entity, reporting route and relevant period, including why the route applies.
Module 02 / 04
Evidence register
Attach each reported figure or statement to its source, method, version and limitations.
Module 03 / 04
Review trail
Name the preparer, reviewer, open questions and decisions taken before publication.
Module 04 / 04
Usable handover
Retain the working files and unresolved actions so the next reporting cycle can reuse the evidence.
View the preparation diagram
- Prepare01
Create the traceable pack
Keep the input records, calculation files and narrative together.
- Challenge02
Resolve questions before publication
Record the assumptions challenged and any limitations still unresolved.
- Retain03
Make the next cycle reproducible
Keep the approved version and the actions carried forward.
Illustrative example
Read one ESG statement critically
Imagine a business describing a new environmental policy to a prospective customer.
A fictional preparation exercise, not a case study or a determination of compliance.
Follow the evidenceQuestion → record → answer
Module 01 / 04
Commitment
Distinguish the promise from a result already achieved.
Module 02 / 04
Action
Identify the activity actually undertaken.
Module 03 / 04
Measurement
Look for a boundary, period and method behind the result.
Module 04 / 04
Accountability
Ask who reviewed the statement and what remains uncertain.
Before publication
Four questions, before the claim leaves the page
Use these questions to expose assumptions that a polished report can otherwise conceal.
Challenge the answerMake the limits visible
Module 01 / 04
Environmental
What environmental issue is the statement addressing?
Module 02 / 04
Social
Does it affect workers, communities or suppliers?
Module 03 / 04
Governance
Who owns the decision and checks the evidence?
Module 04 / 04
Reporting
Which framework, if any, does the statement follow?
Continue your research
Related guides, one question at a time
Sources
Primary sources
Every figure, date and status on this page traces to the instrument’s owner.
Secondary commentary is never the source for a number.
Checked against 12 sources fromThe Global Compact (World Bank repository copy)PRIUN Global Compactlegislation.gov.ukFinancial Conduct AuthorityDepartment for Business and Trade
- The Global Compact (World Bank repository copy)Who Cares Wins — Connecting Financial Markets to a Changing World, December 2004
The report by twenty financial institutions that set out “environmental, social and governance issues”. The World Bank document repository’s copy; no owner-hosted copy is live.
- PRIWhat are the Principles for Responsible Investment?
Six principles, convened by the UN Secretary-General, for incorporating ESG issues into investment.
- UN Global CompactThe Ten Principles of the UN Global Compact
Human rights, labour, environment and anti-corruption.
- legislation.gov.ukCompanies Act 2006, section 414CB(1)
Environmental matters, employees, social matters, respect for human rights, anti-corruption and anti-bribery matters.
- legislation.gov.ukCompanies Act 2006, section 172(1)
The directors’ duty and its six matters.
- Financial Conduct AuthorityFCA Handbook — ESG sourcebook, ESG 4
The anti-greenwashing rule, ESG 4.3.1R.
- legislation.gov.ukSI 2025/1349 — FSMA 2000 (Regulated Activities) (ESG Ratings) Order 2025, arts 2–3
Providing an ESG rating becomes a regulated activity on 29 June 2028.
- Department for Business and TradeUK Sustainability Reporting Standards: UK SRS S1 and UK SRS S2
Published 25 February 2026.
- Department for Business and TradeUK SRS S1 (PDF), ¶3 and ¶¶17–18
The financial materiality test.
- IFRS FoundationIFRS S2 Climate-related Disclosures
- Financial Conduct AuthorityPS26/19: Aligning listed issuers' sustainability disclosures with international standards
- GRIGRI 1: Foundation 2021, section 2.2