Diving deeper into Environmental, Social, and Governance & Sustainability –

Essentially, ESG stands for Environmental, Social, and Governance, and works as an effective tool-set or framework for drilled down evaluation of the potential impacts and associated risks of an organisation’s end-to-end operations. These could be further elaborated as follows

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Environmental: Focuses on factors around an organisation’s carbon footprint, overall waste management, and optimum resource usage – thus assessing as to how the risks in relation to climate change, and the associated creation and spread of pollution are effectively managed.

Social: This factor primarily deals with and examines - the labour practices followed, adherence to primary human rights, presence of diversity, and thorough community engagement.

Governance: It has more to deal with factoring in the accountability, fairness, and transparency within the end-to-end company processes. It also looks into the organisation’s approach towards the expertise within the board, grade of executive pay, and the overall shareholder rights.

It must be noted that, incorporating the Environmental, Social, and Governance principles, and the overall sustainability mindset into analysing the organisational performance and inferring appropriate risk management techniques is increasingly vital in the current times. In this regard, standardized frameworks like the Sustainability Accounting Standards Board (SASB) and the International Sustainability Standards Board (ISSB) greatly assist organisations in providing them industry standard, benchmarked and comparable ESG data, which plays an essential role in the informed decision-making, and accurate assessment of the associated corporate responsibility.

How does ESG and Sustainability differ?

While ESG and sustainability both promote responsible business practices, they differ significantly in their scope and focus -

Similarities: It must be understood that both are ultimately strategic considerations, which aim at improving the overall corporate responsibility of the organisation, as well as its long-term viability.

Differences: The striking differences which mark one from the other are -

Strategic alignment: While the primary focus of ESG remains on the adherence to certain strict scale of metrics, sustainability on the other hand involves more of a holistic and broader approach.

Regulatory focus: ESG is primarily driven by numerous strict regulatory requirements, compliances and peculiar investor demands. Sustainability on the other hand is strongly influenced by broader and wider societal goals as a whole.

Measurement and Reporting: ESG traditionally sticks to very specific and curated metrics scale, while sustainability focusses on the assessment of broader impacts of the organisational activity on the surroundings and the society at large.

Focus on Viability: While ESG emphasizes primarily on the short- to medium-term performance of the organisation and is relatively a goal oriented or tangible approach to measure, sustainability on the other hand emphasizes heavily on the long-term resilience.

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How to approach Environmental, Social, and Governance and Sustainability?

Its seen with experience that organisations normally move ahead through four main stages of the ESG Journey -

Compliance Adherence - Meeting the regulatory requirements reactively and focussing on avoiding any penal action by abiding the law.

Stakeholder Obligation: Addressing broader expectations from relevant stakeholders – including the shareholders, internal employees, competitors, and thus focussing one level beyond the typical legal requirements.

Performance: Actively enhancing and engaging in the ESG process and outcomes, with pre-defined and set targets, backed by a dedicated resource allocation plan.

ESG Mind-set Integration: Fundamentally embedding the ethos of ESG principles deeply into the very core operations, culture, functioning and psyche of the organisation, thus significantly leveraging a plethora of innovative solutions for ensuring an aligned and resilient business model.

Ultimately, a proactive leveraging of ESG and sustainability initiatives significantly enhances the competitiveness and overall reputation of the organisation, while simultaneously contributing to a sustainable future.