ESG

Environment, Social
& Governance

how sustainable is
the business?

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The abbreviation ESG
stands for
Environment, Social
and Governance. The
Environmental, Social
and Governance
framework evaluates
an organisation’s
performance and
practices on
sustainability and
ethical issues.

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 Three Pillars of
ESG

1
The Environmental criteria
examine the influence of a
company’s business
operations on its
surroundings. It measures how
the business manages its
operational and product’s
impact on the environment.

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 Under Social criteria, the
business focuses on
building and maintaining
relationships with different
stakeholders. The company
also strives to create value
for stakeholders, including
suppliers, employees,
government, customers, etc.

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2
 3
The Governance factor
of ESG works on
management
philosophies, policies,
practices and values.
The governance criteria
are wholly associated
with how the company is
led and managed.

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Factors under
ESG
Under the ESG framework, a
company evaluates
numerous factors under
environmental, social and
governance heads. Here are
some fundamental factors
typically assessed under each
category:

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 Environmental Factors:

Climate Change.
Optimum use of natural
resources.
Pollution and waste
management.
Compliance with Environmental
Laws and Guidelines.
Preservation and Service
towards Biodiversity and
Ecosystem.

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Social Factors:

Adoption of healthy & safe

Labour Practices.
Adoption of diversity and
inclusion policies within the
workforce, gender and racial
equality.
Training and development of
human capital.
Customer welfare by offering
safe products and through fair
market practices.

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Governance Factors:

Adoption of ethical business

practices and anti-corruption
measures.
Ensuring adherence to legal and
regulatory guidelines is
imperative.
Investment strategies and fund
allocation must be transparent
for investors and regulators.

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Factors that
promote ESG
In the corporate world,
three elementary factors
drive the growth and
requirement of ESG. They
are materiality,
transparency and
regulation.

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1
Materiality focuses on how
investors weigh ESG with the
risk and return of a business.
Recognition of these
relations leads to the long-
term success of businesses.
To understand materiality,
businesses perform
materiality analysis. It is a
process which identifies
important ESG issues and
stakeholders which can help
sustain the long-term growth
of a business.
2
Materiality leads to the
need for transparency.
Investors and clients
demand greater
transparency on how
the company invests
their money.

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 3
Regulation is the final
factor that led to ESG as a
mainstream business
concept. Regulations at
national and international
levels help businesses to
check that they are not
violating any
environmental, social or
government norms.

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Real-Life
Example of
ESG – Nvidia
Every year NVIDIA publishes a
corporate responsibility
report. Therefore, by taking it
as a reference we will try to
understand the ESG strategies
of NVIDIA for 2023.

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Development of technologies
that contribute positively to
society, with a focus on
responsible development and
use of AI.

Commitment to societal
innovation, particularly in the
healthcare sector, by harnessing
the power of AI and high-
performance computing to
advance personalised medicine,
enhance quality of care, and
drive breakthroughs in
biomedical research.
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Commitment to sustainability
reporting frameworks such as
the Global Reporting Initiative
(GRI), Sustainability
Accounting Standards Board
(SASB), and Task Force on
Climate-Related Financial
Disclosures (TCFD) to ensure
transparency and
accountability in reporting
corporate responsibility efforts.

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 Alignment of social
impact activities with
the United Nations’
Sustainable
Development Goals
to contribute to
global sustainability
and development
objectives.

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Business
Practices of
NVIDIA
NVIDIA's business practices
underscore its dedication to
ethical conduct, sustainability,
innovation, and stakeholder
engagement, encompassing
initiatives that exemplify these
commitments.

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 Code of Conduct and
Human Rights: NVIDIA
mandates employee
training on its code of
conduct, ensuring
adherence to human rights
guidelines, with confidential
reporting avenues for
concerns and swift
investigation of violations.

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 Sustainability and
Environmental
Stewardship: NVIDIA
prioritizes sustainability
through energy-efficient
practices, emission
management, and
sustainable product
lifecycle operations, actively
supporting climate action.

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Innovation and Technology
Development: Renowned for
accelerated computing and AI
innovation, NVIDIA's products drive
advancements across industries,
contributing to societal progress.

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 Corporate Responsibility
and Stakeholder
Engagement: NVIDIA
engages stakeholders on
social and environmental
issues, emphasizing
diversity, supply chain
management, product
impact, and sustainability
reporting.

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 Employee Benefits and
Well-being: NVIDIA offers
comprehensive benefits
including competitive
wages, flexible hours, well-
being programs, parental
leave, tuition
reimbursement, and
professional development
opportunities.

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Talent Attraction and
Recruitment: Prioritizing diversity,
NVIDIA partners with educational
institutions and professional
organizations to attract global
talent and support
underrepresented communities in
recruitment.

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 Cybersecurity and Data
Privacy: NVIDIA maintains
robust cybersecurity
measures, protecting
confidential information
and complying with data
privacy regulations, while
continuously evolving
strategies to address
emerging risks.

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Importance of
ESG
The importance of ESG is
reflected in the company’s
long-term growth as it
positively impacts
foundational business issues
like climate change, pollution,
labour management, etc.

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 Risk Management – ESG criteria help
businesses forecast and prepare for
numerous risks like evolving
regulations, labour availability,
scarcity of resources, etc.

Corporate Image – Corporates' adept

communication of their ESG perspective
to investors and the public reflects their
awareness of inherent risks and
opportunities, facilitating goal
attainment and fostering sustained
long-term growth.

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 Opportunity Management –
The dynamic nature of the
business environment leads
to constant changes in the
demand and supply of goods
and services. Through ESG
assessment, businesses can
capitalise on such
opportunities and prepare for
possible threats.

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 Regulatory Compliance:
Governments and
regulatory bodies
worldwide are bringing
strict guidelines and
initiatives for
environmental protection,
social responsibility, and
corporate governance.
United Nations
Sustainable Development
Goals is one of the major
initiatives.

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 Culture and Value Formation– The
integration of ESG factors and
regulations into business
operations cultivates a culture that
fosters values such as
environmental protection, pollution
control, and responsible resource
management, shaping the
attitudes, behaviors, and skills of
stakeholders and human
resources.

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 Innovation and Competitive
Advantage: ESG can drive
innovation, opening up new
markets and opportunities. By
capitalising on such
opportunities companies can
gain a significant competitive
advantage over peer
companies. Also if businesses
adopt sustainable business
practices, it can be a significant
differentiator in a crowded
marketplace.

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NVIDIA on
People,
Diversity &
Inclusion:
In 2023, NVIDIA demonstrates its
commitment to diversity and
inclusion in the workplace
through various initiatives and
practices, including:

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 Energy Efficiency: NVIDIA
focuses on improving the
energy efficiency and
performance of its products.
For example, the company has
developed liquid-cooled GPUs
that consume less power and
rack space compared to
traditional air-cooled servers,
leading to energy savings.

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 Greenhouse Gas Emissions
Management: NVIDIA assesses its
carbon footprint across the product
lifecycle and evaluates climate risks,
including regulatory and market
impacts. The company is committed
to managing its greenhouse gas
emissions and has set a goal to
purchase or generate enough
renewable energy to match 100% of its
global electricity usage for offices and
data centres by the end of the fiscal
year ending January 26, 2025.

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 Sustainable Practices: NVIDIA
implements energy and
environmental management
systems, certifications, policies,
procedures, and programs to
promote sustainability. The
company also focuses on water
conservation, waste
management, and efforts
around product packaging,
transport, and end-of-life
management.

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Climate Change
Mitigation: NVIDIA
leverages its
technology to support
climate change
mitigation and
adaptation efforts.

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NVIDIA and
Sustainability

NVIDIA has implemented

several sustainability
efforts to reduce its
environmental impact and
promote climate action.
Some of these initiatives
include:

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 Talent Attraction and
Recruitment: NVIDIA actively
recruits diverse talent by
partnering with higher education
institutions, professional
organisations, and industry
conferences. The company
encourages employee referrals
and has dedicated recruiters to
assist women and
underrepresented communities
through the recruitment process.

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Inclusive Work Environment:
NVIDIA fosters an inclusive
work environment that
supports all employees,
regardless of gender, age,
race, ethnicity, or disability.
The company prioritise
creating a culture where
diverse teams can thrive and
contribute to innovation.

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 Employee Engagement: NVIDIA
values employee feedback and
engagement, conducting
frequent surveys to measure
employee satisfaction,
engagement levels, and culture.
This robust approach allows the
company to address specific
areas of improvement and
respond quickly to employee
needs and concerns.

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 Professional Development and
Training: NVIDIA invests in
professional and leadership
development programs to
support the growth and
advancement of all employees.
The company provides
opportunities for skill-building,
career advancement, and
continuous learning to ensure a
diverse and inclusive workforce.

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 Health and Safety Policies:
NVIDIA prioritises the health
and safety of its employees
by implementing policies,
programs, and performance
measures to maintain a safe
work environment. The
company is committed to
ensuring the well-being of all
employees.

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Top 25 Global
ESG Scorers in
2023

The following graph

shows the list of 25
companies that scored
highest in ESG ranking in
2023:

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 Source: https://www.statista.com/statistics/
1268534/comparison-esg-scores-largest-companies-
provider-worldwide/

Microsoft holds the first position by

scoring 72.76 out of 100. Followed by
Applied Materials and Woodwards with
71.71 and 71.69 points respectively.

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In 2023, NVIDIA
scored 69.4
points and
holds the 8th
position in the
top 25 global
ESG scorers.

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Difference Between
CSR and ESG
ESG, as a comprehensive
framework, surpasses the
narrower scope of Corporate
Social Responsibility (CSR) by
integrating environmental, social,
and governance factors directly
into core business operations,
enabling companies to
effectively manage risks, identify
opportunities, and engage
diverse stakeholders,
representing an evolution from
traditional CSR practices.

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Summing Up
ESG, as a holistic framework, is
indispensable for businesses as they
negotiate sustainability and ethical
obligations, transcending conventional
corporate social responsibility by
embedding environmental, social, and
governance considerations into
strategic imperatives, thereby
fortifying long-term resilience, risk
mitigation, and corporate standing
amid a multifaceted business
landscape.

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 Ashish Agarwal

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