ESG is the acronym for a broad set of issues related to environmental, social, and governance performance that businesses can manage to reduce risk and costs, improve efficiencies, strengthen reputation, attract customers and staff, and have a positive impact on society and the environment.
ESG has become widely used by investors and finance providers worldwide to describe the practices that they encourage businesses to adopt and increasingly require as part of investment agreements. These practices and expectations have evolved globally over many years and with extensive inputs from experts in different fields. Today, ESG is supported by robust and comprehensive standards, reporting frameworks, and technical guidance. With greater convergence of the different practice areas under ESG, we are also seeing more opportunities to build on synergies and a systems approach.
ESG can be seen as the engine that helps the private sector contribute to sustainable development: namely, “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” (Brundtland Commission, 1987)
Many of the aspirations and practices of ESG are embodied in the Sustainable Development Goals.
A growing body of research shows that better ESG performance can help businesses outperform and access lower cost of capital.
Investors, banks and insurance providers increasingly favour businesses that are well managed and benefit people and the environment. Many ESG performance improvements can lead to cost savings and efficiencies. And the amount of customers wanting to buy from ethical companies continues to grow.
This is just some of the value you can unlock through effective ESG management. But these benefits are only achieved when organisations address the most material and relevant ESG issues for their sectors and locations.
By knowing what ESG factors are most relevant to your business and how well you are managing them, you can begin to improve and leverage these for competitive advantage and to attract capital seeking positive impact.
Put yourself first in line to attract these new types of benefits and stakeholders, and differentiate your business.