What is ESG and why does it matter?

What is ESG and why does it matter?

02 November 2022

From CSR (Corporate Social Responsibility) came a new set of pillars - ESG (Environmental, Social and Governance) - which require a largely strategic, quantitative approach as opposed to qualitative. In a more practical sense, ESG performance is often assessed and evaluated in the decision-making process of potential investors.  

 

‘Environmental’ looks at limiting the negative impact on physical surroundings that stem from your business operations, including waste generation and how it’s processed, contamination of soil and water by chemicals released, and greenhouse gas emissions into the atmosphere. We’ve recently discussed reducing e-waste and adopting a circular economy, rather than a linear one, plays into this. 

 

‘Social’ includes targets that empower the people around you, both those within your company and those impacted by it, honoring and protecting human rights. This includes the perhaps more obvious policies around staff welfare, employee personal development, and philanthropic activities, but also cybersecurity as data breaches can initiate identity theft and impact the economy.  

 

Finally, the ‘Governance’ aspect covers the competitive approach to the market that the business takes and the tactics it employs, keeping it in line with fair and ethical practices. This involves corporate training, managerial conduct, compliance, and accreditations that the business seeks.  

 

We’re becoming increasingly conscious of how our behavior affects the world around us. The stark reality of the negative impacts we have are becoming less avoidable, demanding more than generic sustainability goals. As our awareness and education increase, so too does the call to step up and do more to eradicate harmful practices. Sustainability is becoming expected, a necessity, rather than a luxury. As a result, we’ve seen a rise of the term ‘greenwashing’, where businesses provide misleading information or employ smoke and mirrors marketing tactics to inflate or exaggerate their sustainability commitments. It is data-driven and measurable. It is red numbers and green numbers, hitting targets or failing. It removes the grey areas that you could hide in and holds you accountable.  

 

Does your company have an ESG policy, and what does it mean to you? How do you feel about the progression from CSR to ESG?