What is ESG? — Environmental, Social, Governance
ESG stands for Environmental, Social and Governance — the three pillars used to assess corporate sustainability from an investor perspective. Coined in the 2004 UN ‘Who Cares Wins’ report, ESG has evolved from voluntary investor screening into mandatory disclosure under UK SRS, FCA Listing Rules and SI 2022/31.
The numbers that define ESG today
From a 2004 UN report to a $40 trillion global market and an emerging mandatory UK regime.
ESG defined
A clear definition, plus the distinctions investors and regulators draw between ESG, sustainability, CSR and impact investing.
- ESG Investor-focused framework
- Environmental, Social and Governance — three pillars used to assess a company's non-financial performance and material sustainability risks. Quantitative, comparable, and increasingly integrated into financial analysis and mandatory disclosure.
- Sustainability Broader concept
- The principle of meeting present needs without compromising future generations. Encompasses ESG but also broader concepts like circular economy, regenerative business, planetary boundaries. All ESG is sustainability; not all sustainability is ESG.
- CSR (Corporate Social Responsibility) Predecessor concept
- Voluntary corporate practice (from the 1970s) focused on philanthropy, stakeholder engagement and community responsibility. Qualitative, narrative-driven, often outside the financial statements. ESG largely replaced CSR as the dominant investor language from the mid-2000s — see ESG vs CSR for the full comparison.
- Impact investing Adjacent concept
- Investments made with the explicit intention to generate measurable social or environmental impact alongside financial return. Narrower than ESG: where ESG asks how sustainability affects the company, impact investing asks how the investment affects sustainability.
- Financial materiality ESG approach
- Whether an ESG factor could reasonably influence the company's enterprise value — cash flows, access to finance, cost of capital. The lens used by UK SRS and IFRS S1/S2.
- Double materiality EU approach
- The EU CSRD / ESRS framework combines financial materiality with impact materiality — the company’s effects on people and planet. See double materiality for the detail.
E + S + G — the architecture
Each pillar covers a distinct set of issues with its own measurement tools, disclosure frameworks, and regulatory triggers. See /esg-pillars for the detailed breakdown.
- E — Environmental Climate, nature, resources
- Climate change and greenhouse gas (GHG) emissions; energy use; biodiversity and ecosystems; water and resource scarcity; pollution and waste; circular economy. Measured via GHG Protocol, TCFD scenario analysis, TNFD nature disclosures. Mandatory in the UK via SECR, TCFD, and emerging UK SRS S2.
- S — Social People, communities, value chain
- Workforce conditions and rights; diversity, equity and inclusion; health and safety; community impact; human rights; supply chain labour; product safety and consumer protection. Mandatory UK touchpoints: Modern Slavery Act, Gender Pay Gap Reporting Regulations, Workforce reporting under FRC Corporate Governance Code.
- G — Governance Board, ethics, controls
- Board composition and independence; executive remuneration; anti-corruption and ethics; risk management; shareholder rights; tax transparency; lobbying. Anchored in UK by the FRC Corporate Governance Code, the Companies Act 2006, and FCA Listing Rules.
It can be considered as the heart of corporate sustainability — three pillars that together provide the most material lens on whether a company creates lasting value.
UN Global Compact — ‘Who Cares Wins’ (2004)
From 2004 UN report to mandatory UK regulation
Two decades of ESG evolution — voluntary investor screening to mandatory corporate disclosure.
- 2004UN ‘Who Cares Wins’ report coins ESG
- 2006UN PRI launched — 6 ESG investment principles
- 2015FSB establishes TCFD for climate disclosure
- 2019UK SECR makes energy + carbon disclosure mandatory
- 2022UK SI 2022/31 climate-related disclosure rules
- JUN 2023ISSB publishes IFRS S1 + S2
- 25 FEB 2026DBT publishes UK SRS S1 + S2
- AUTUMN 2026FCA Policy Statement on CP26/5
- 1 JAN 2027UK SRS S2 proposed mandatory for listed companies
UK ESG regulation today
Three layers of UK ESG regulation: corporate disclosure (UK SRS, SECR, TCFD), fund-level disclosure (FCA SDR), and the regulated ESG ratings market from 2028.
- UK SRS (UK Sustainability Reporting Standards) Corporate disclosure baseline
- DBT-issued investor-focused standards comprising UK SRS S1 (general) and UK SRS S2 (climate), built on IFRS S1/S2 with six UK amendments 2. Voluntary today; proposed mandatory for ~500 listed companies from 1 January 2027 under FCA CP26/5.
- FCA SDR (Sustainability Disclosure Requirements) Fund-product disclosure
- FCA regime governing how UK investment products are labelled, described and marketed on sustainability grounds. Backed by an anti-greenwashing rule applying to all FCA-authorised firms. See /fca-sdr-anti-greenwashing.
- SECR (Streamlined Energy and Carbon Reporting) Large-company mandatory
- Mandatory energy and Scope 1/2 carbon disclosure since April 2019 for ~11,900 large UK companies, LLPs and quoted companies. See SECR reporting guide.
- SI 2022/31 (TCFD-aligned mandatory) Strategic-report disclosure
- Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 — mandatory TCFD-aligned disclosure for ~2,500 large UK entities with 500+ employees from financial years starting 6 April 2022. See TCFD UK requirements.
- ESG Ratings Order 2025 New regulated market
- Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025, signed 15 December 2025. Brings ESG ratings providers within FCA authorisation by 29 June 2028 3.
- Modernising Corporate Reporting DBT programme
- Government programme reviewing the wider corporate reporting framework — potential expansion of UK SRS scope beyond listed companies to large private companies and LLPs.
ESG, sustainability, CSR — the distinctions
Investors and regulators draw careful lines between ESG, sustainability and CSR. The differences matter for reporting obligations and stakeholder communication.
ESG vs sustainability vs CSR
ESG is investor-focused, quantitative, increasingly mandatory; sustainability is the broader systems concept covering ESG plus regenerative business and planetary boundaries; CSR is the older, voluntary, stakeholder-focused predecessor of ESG.
Choosing the right framing is essential for how a company communicates with investors, customers and regulators — and increasingly for the disclosure regime that applies.
ESG — frequently asked
What it means, the three pillars, the difference from sustainability and CSR, UK mandatory status, and the most important UK framework.
What does ESG stand for?
ESG stands for Environmental, Social and Governance — the three pillars used to assess a company's non-financial performance and sustainability risks.
The term was coined in the 2004 UN Global Compact 'Who Cares Wins' report and has become the dominant investor-focused framework for sustainability assessment.
What is the difference between ESG and sustainability?
Sustainability is the broader concept — how a business operates without depleting resources or harming society.
ESG is a specific investor-focused lens that measures sustainability performance through three quantifiable pillars (E, S, G).
All ESG is sustainability; not all sustainability is ESG.
ESG emphasises financial materiality — how environmental and social factors affect company value — whereas broader sustainability often considers the company's impact on the world.
What is the difference between ESG and CSR?
CSR (Corporate Social Responsibility) is the older concept (1970s onwards) focused on philanthropy, community engagement and stakeholder responsibility.
ESG (from 2004) is the investor-focused evolution — quantifiable, comparable, integrated into financial analysis, and increasingly mandatory.
CSR is voluntary and qualitative; ESG is increasingly regulated and metric-driven.
See our /esg-vs-csr comparison for the full breakdown.
Is ESG mandatory in the UK?
Partially, and increasingly.
Climate-related disclosures under FCA Listing Rules (UKLR 6.6.6R(8)) and SI 2022/31 are mandatory for ~2,500 UK entities.
SECR has required energy and carbon disclosure since 2019 for ~11,900 large companies.
The FCA proposes mandatory UK SRS S2 for ~500 listed companies from 1 January 2027.
Broader ESG topics under UK SRS S1 follow on comply-or-explain from 2029.
The Government is also extending corporate reporting under Modernising Corporate Reporting.
What are the three pillars of ESG?
Environmental (climate change, GHG emissions, energy, biodiversity, water, pollution, circular economy).
Social (workforce, health and safety, diversity, communities, human rights, supply chain labour).
Governance (board composition, executive pay, anti-corruption, risk management, business ethics, shareholder rights).
See our /esg-pillars page for the detailed breakdown with UK examples.
What is the most important ESG framework in the UK?
UK SRS (UK Sustainability Reporting Standards) is the emerging mandatory baseline.
Published by DBT on 25 February 2026, comprising S1 (general sustainability) and S2 (climate-specific), built on the ISSB's IFRS S1 and S2 with six UK-specific amendments.
The FCA's CP26/5 proposes UK SRS S2 mandatory for listed companies from 2027.
Other major frameworks include TCFD (being absorbed by UK SRS), GRI (voluntary, impact-focused), CDP (climate questionnaire), SASB (industry-specific, now part of ISSB).
The ESG guide set
From the definition, continue to the three pillars, frameworks, criteria, practical reporting, software and strategy.
The three ESG pillars
Environmental, Social and Governance — what each pillar covers, with UK examples and metrics.
CompareESG vs CSR
How ESG evolved from CSR — investor focus, quantification, and mandatory disclosure.
FrameworksESG frameworks — UK comparison
UK SRS, GRI, SASB, TCFD, CDP, ESRS / CSRD compared for UK preparers.
StandardsESG standards — UK regulatory landscape
UK SRS, FCA SDR, SECR, SI 2022/31 — the standards-based regime.
CriteriaESG criteria for UK companies
Practical criteria per pillar — what investors and rating agencies look for.
Reporting hubESG reporting — UK hub
Three-layer UK system; UK SRS backbone; preparation roadmap.
Related guides & references
Primary references
UN, DBT, FCA and statutory instruments anchoring every claim on this page.