Certified Environmental Social and Governance Analyst (CESGA) EFFAS Practice Test 2025 - Free CESGA Practice Questions and Study Guide

A company's Environmental, Social, and Governance (ESG) rating is influenced by various practices throughout its supply chain. The correct response highlights that supply chain practices can directly impact the evaluation of a company's sustainability and ethical conduct, which are core components of the ESG rating.

Ethical labor practices are crucial for the “Social” aspect of ESG. A company that ensures fair wages, safe working conditions, and non-exploitative labor practices enhances its social responsibility footprint, which could positively affect its ESG score.

Improving customer satisfaction, while important for business operations, doesn’t inherently align with ESG criteria. Customer satisfaction outcomes can result from various factors that are not directly linked to supply chain practices affecting ESG metrics.

Increasing production costs is often a concern for businesses, especially when considering sustainable practices that may initially seem more expensive. However, these costs do not directly correlate with a company's ESG rating as they do not inherently reflect ethical or sustainable efforts within the supply chain.

In contrast, the impact of poor supply chain practices can indeed lower a company's ESG score when suppliers engage in unethical behaviors, leading to negative assessments from investors and stakeholders who value sustainability and ethical governance. Thus, the response regarding the supply chain's potential to lower the company's ESG score serves as a reminder