The new buzzword in business: Environmental Social Governance (ESG)

The concept of sustainability has been around for a long time and where it was previously seen as the domain of environmental activists and do-gooders, this perception has recently undergone a radical change. A vast range of environmental issues, social concerns and the greater need for transparent and good governance have been receiving a great deal of attention in the public and private sector. While the concept is not new, based on the recent “buzz”, environmental, social and governance (ESG) factors have been elevated from a niche concern to critical business imperatives.

The world is increasingly focusing on ESG issues. Many aspects such as human rights, energy consumption, climate change, pollution control and responsible and ethical business practices amongst others, are now considered to be non-negotiables for responsible investing. Under the ESG investing approach, stakeholders now look beyond a company’s financial performance, and comprehensively consider performance.

There is a general perception that ESG is largely about shareholder and enterprise value, driven by the financial sector, particularly as it links to responsible investing principles. In the larger scheme, sustainability has always had a much wider scope focused on systemic and behavioral change for the achievement of the great good, balancing the needs of current and future generations. The increased focus on ESG has served a valuable role in ensuring that sustainability and profitability are now seen as an integral part of responsible business management.

This shift in thinking and approach have gone a long way in negating the perception that sustainability conflicts with profitability agendas. In the long-run, sustainability and the associated ESG reporting are business enables which save money, build credibility, and provide stakeholders with much needed assurance of sound management strategies which are intuitive rather than reactive ensuring the resilience, survival, and growth of businesses.

While a great deal of work is still required to meet the global goals to address climate change, the shift in thinking and approaches are crucial steps in the right direction. It is incumbent on each one of us, businesses, and individuals, to do the right thing for the greater good.