The acronym combines three groups of factors: environmental impact, relations with employees and society, and corporate governance structure. Assessment based on these factors complements financial analysis rather than replacing it.
The practical logic is that some of these factors represent risks not visible in current reporting but potentially materializing later: environmental restrictions and related costs, employee conflicts, reputational damage, and governance risks—opaque ownership structures, related-party transactions, lack of independent board members.
Of the three components, the last is most directly significant for a private investor. Management quality affects profit distribution among shareholders and minority protection, and can be assessed using available disclosure data without relying on external ratings.
A limitation of the approach is the absence of a unified methodology. Assessments from different providers for the same company diverge, and much of the data is provided by the companies themselves, creating opportunities for selective disclosure. Therefore, it is more reasonable to rely on verifiable corporate governance facts than on an overall score.