If you polled corporate boards, financial services firms, and governments about ESG, you might come away with as many definitions as respondents. However, at its core, the acronym “ESG” (Environmental, Social, and Corporate Governance) addresses the risks and opportunities linked to a company’s long-term value, encompassing both financial and ecological considerations.
Despite its broad concept, the 2004 whitepaper “Who Cares Wins” introduced a crucial distinction, delineating ESG from sustainability and purpose. Yet, these distinctions can blur, particularly concerning stakeholders, as issues like purpose become pivotal to a business when they align with stakeholder values, influencing talent dynamics.
While ESG-related ideas were sometimes encapsulated under Corporate Social Responsibility (CSR) and Socially Responsible Investing (SRI), the term gained mainstream attention in 2019 amid a confluence of global events—ranging from COVID to changing work dynamics, social unrest, and extreme weather events.
In our interconnected world, ESG acts as a lens to assess the impacts of crises on companies and stakeholders. Navigating responsibly demands a diverse skill set for companies and investors, ranging from specialized expertise to a holistic perspective.
Actions addressing ESG concerns, such as transitioning from high-emitting suppliers, require careful scrutiny for potential unintended consequences, like economic downturns and geopolitical tensions.
