ESG & Sustainability – Make big & bold commitments and take small impactful actions

For most people, the biggest issue that comes to mind when they think of ESG is Climate Change. Is that all what ESG is about? Let’s simplify and understand it with the help of a few important topics.

The UN Secretary-General met with CEOs of leading global institutions in January 2004 to discuss environmental, social and governance philosophies. Later in 2005, a landmark study “Who Cares Wins” coined the term ESG (Environment, Social & Governance). Even though ESG started as a term used for responsible investing by capital markets, it has grown into the corporate lingo as the way of conducting business in a responsible manner. And this responsibility is not just to the environment, but also to the various lives that the business touches – employees, customers, suppliers, vendors, investors and communities.

The concept of ESG is nothing new. Many companies have followed responsible business practices for hundreds of years. But now the consumers’ demand for greener choices, better behaviour and transparency; are forcing companies to look at it seriously. Many people confuse ESG with CSR activities, but ESG is much more – it is a shift in the philosophy of the company leadership on how to take every decision with a sustainability lens. Donations of a certain percentage of a company’s profits to charities is no more enough.

In ESG – “E” covers environmental criteria like reducing emissions, waste management. “S” includes social & human capital practices like health & safety, diversity, inclusion. And “G” involves corporate governance and behaviour elements like ethics, fairness, transparency, anti-corruption, anti-bribery.

SDGs – Sustainable Development Goals – were adopted by the United Nations in September 2015 for achieving the ideal of a sustainable, diverse and inclusive society, which leaves no one behind, by 2030. While companies are not bound by law to do so, still more and more companies around the world have been actively considering the SDGs when they develop their ESG programs and benchmarks – for the long-term benefits they will ultimately provide. In simple terms, we can say that SDGs are the “What” & “Why” and ESG is the “How” for creating sustainable practices. Organizations that focus on the SDGs are likely to improve their ESG score and are bound to uncover new opportunities for sustainable growth.

With all the focus on the environment, social and governance parameters, the ultimate goal is to create long-term value for not only the business but also for the society. However, one of the biggest challenges faced by businesses to integrate sustainability within their decision-making processes is the lack of relevant data, transparency and harmonization around ESG performance. 

As more and more companies are adopting sustainable practices, they are producing data that is relevant for them but a lot of that is qualitative and non-standardized data. Companies must adopt measurement systems, dashboards and tools that track relevant and measurable ESG data and help them benchmark their performance against competitors and industry leaders.

As defined by the UN in 1987, Sustainability means – meeting the needs of the present without compromising the ability of future generations to meet their own needs. It is not just about conserving and sustaining natural resources, it is also about sustaining effective social paradigms that provide a healthy environment to flourish and economic resources that provide the fuel for growth. Corporate sustainability aims to create long-term stakeholder value through a focus on the environmental, social, cultural, ethical dimensions of implementing their strategy.

On the environment front, the amount of abuse that humans have done to the environment over the last 200 years is much more than thousands of years before that. We need big and bold commitments along with small everyday actions to slow down the pace of environmental abuse and societal issues. Our positive actions have the power to stave off the crisis and create a beautiful liveable and breathable planet.

The coronavirus pandemic along with many movements like the Black Lives Matter, MeToo, and Equal Pay campaigns have brought the focus to social issues among corporates. Issues such as human rights, gender equality, labour standards, minimum wages, executive pay and many others are now important parts of the benchmarking for an ESG scorecard. The G in ESG also matters to the corporates looking to create long-term value. It covers a broad range of activities including board structures, information disclosure, audit & compliance, policies & procedures and most importantly – the culture. Corporate governance issues make headlines on a regular basis and are therefore critical to be managed well to ensure a solid reputation of the businesses.

The words “Green” and “Sustainability” have become so overused and over-generalized that it has become a shorthand for any good thing a company does. Sustainability has also become synonymous with CSR, ESG and Triple Bottom Line (which requires a company to include People & Planet along with Profit on its balance sheet). While it does not matter what words and acronyms we use, what matters is how impactful our actions are and how we are measuring them while balancing the needs of all stakeholder groups and future generations.

It is time to grasp the opportunities that come along with the changing mindset of the businesses focusing on ESG. Take a step every day towards a greener future.

Views of the author are personal and do not necessarily represent the website’s views.

Hemant comes with a rich & varied experience of 27+ years in Technology, Business Process Services, Clinical Research and Culture Transformation across many industry verticals. His career spans an interesting mix of roles as an MD, COO, CTO, CIO, and VP in small, medium & large global corporations and also as an Angel Investor, Advisor, Coach and Mentor for startups. He has a deep understanding of global workplace cultures having lived and worked in 1O different cities across the US and India.

This column appears in the March 2022 edition of our quarterly magazine. To grab your own copy, click here