73% of Gen Z consumers surveyed were willing to pay more for sustainable products, more than every other generation, per First Insight. Clearly, the younger generation cares about ethical and sustainable business.
Environmental, Social and Governance (ESG) ratings have been used by academic researchers for years to understand the social and environmental impact of companies. In recent years, however, these ratings have become more important to the companies themselves. A company's ESG rating is now often used by investors to assess risk and potential return. Because of this, many companies are now incorporating ESG factors into their decision-making processes.
ESG ratings are based on a company’s environmental, social, and governance practices. These ratings are important because they can impact a company’s reputation and, as a result, its bottom line. Good ESG ratings can attract investors, customers, and talent, while poor ratings can lead to higher costs of capital, lost business, and difficulty attracting and retaining employees.