This post is part of a series about what is ESG and what it has to do with the gambling industry.
What is Governance in ESG?
In ESG, the “G” stands for governance, but it’s not just about following the law; it’s about how companies are run. Governance focuses on the rules, values and structures that guide and control companies. ESG governance standards set a baseline to ensure companies follow certain rules in their business practices. These standards cover things like how a company handles its finances, chooses leaders, organizes its management, makes ethical decisions, and treats its employees, including their compensation compared to top executives (aka pay ration).
Read also: Understanding environmental responsibility and Understanding social responsibility
Using ESG Governance to Assess Companies
ESG governance criteria help us measure whether a company’s decision-makers are truly committed to sustainability in their business practices across various areas. For example, does the company practice true transparency in its operations, or is it only as transparent as needed to appear sustainable and fair?
Example of Bad Practice: Volkswagen’s Emissions Scandal
In 2015, Volkswagen got into a major scandal. The US Environmental Protection Agency found out that Volkswagen had installed special software in nearly 11 million cars worldwide. This software could detect when emission tests were being conducted, and it would manipulate the performance to appear better than they were. Volkswagen admitted to cheating on emissions tests, and this action had a direct impact on global environmental sustainability. It’s an example of poor corporate governance, where the company allowed cheating to occur to look like it was supporting sustainability, which is known as “greenwashing.”
Example of Good Practice: Norway’s Sovereign Wealth Fund
On the other side of the governance spectrum, Norway’s sovereign wealth fund, which has $900 billion invested globally, took steps to limit excessive salaries and compensation packages at companies they invest in. They believed such packages were against the long-term interests of the company’s shareholders. The fund voted against a compensation package for Tim Cook, Apple’s CEO, and the pay policies of the company in general. Additionally, in 2021, the fund divested from oil and gas companies to reduce the country’s reliance on the petroleum industry. These actions show corporate governance aligned with global environmental and social sustainability needs.
Assessing Governance in the Gaming and iGaming Industries
I review gambling companies on their ESG performance in order to determine which casinos and sportsbook entertainment is the most sustainable. When it comes to governance, I examine factors such as:
1. Business Ethics and Corporate Values: How these values are reflected in the marketplace.
2. Compliance with Industry Laws and Regulations: Ensuring companies follow the rules of the gaming industry.
3. Corporate Responsibility and Tax History: Companies’ track records regarding taxes and responsible corporate behaviour.
4. Greenwashing: Assessing whether companies are truly taking meaningful actions toward sustainability rather than just making empty claims.
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