If you’re in business, chances are you’ve heard the acronym ESG being thrown around liberally. ESG (Environmental, Social, and Governance) are the ethics considered most important by the stakeholders of a company. Let’s take a closer look at ESG and why you should stop ignoring the ‘S’.
DELVING INTO ESG
Buzz word ‘ESG’ stands for Environmental, Social, and Governance – the parameters that stakeholders most commonly use to evaluate the ethics of a company. If we pull back and look at the overall concept, what it boils down to is corporate responsibilities and relationships.
- Environmental – the company’s relationship with the environment and the environmental issues they take responsibility for;
- Social – the company’s relationship with its community and how it takes responsibility for nurturing those relationships; and
- Governance – the ethics and policies of the company that guide its corporate and financial responsibilities and affiliate relationships.
Whilst not compulsory in Australia, ESG reporting addresses a measurable criteria that guides stakeholder investment, community support, and company accountability – if proper reporting is used.
At the Shared Values Summit Asia Pacific, held 21 June 2021, Mark Kramer stated that “$51 billion net new dollars went into ESG in 2020, double the year before, which is great…[But] because the disclosing about ESG are still voluntary, its hard to know what the impact really is“.