ESG – Here for the long haul
Trump 2.0 has sent shock waves throughout ESG circles and many commentators are suggesting that ESG’s time may be up. Such comments are short-sighted and overlook the depth of the corporate journey of ESG and therefore its resilience in the face of its critics.
Whilst ESG may be talked about as a trend that has found its way onto the agenda, its origins are more deep-rooted than that. Recessions, social unrest, inequality, all contributed to the impetus that saw Corporate Social Responsibility – the buzz term of the 90’s – evolve into today’s more formal corporate and ethical construct, ESG.
Principles of ESG
As a concept, ESG is not new. Its provenance and progress has arguably been public-driven, rooted in consumer and societal demand to do things differently, better. Increasingly since the turn of the century, shareholders have had to acquiesce to stakeholder activism as the demand for more responsible, accountable business practice took hold.
Park the acronym and examine the principles and what we’re talking about is accountability, transparency and equity. Double Materiality[i] is a critical, not hygiene factor these days. It makes sense that a well-run organisation would take a holistic view of itself examining both the ‘outside in’ and ‘inside out’ perspectives i.e. its impact on the society and environment in which it operates, and the society and environment in which it operates impact on the organisation. Success requires an appreciation of this symbiosis.
What You Measure Matters
Protagonists may argue that without regulation, ESG will falter, but this sidelines the very real ‘carrot’ impetus for ESG – the benefits of deploying equitable labour practices, currying favour with your communities, being efficient with resources, systemising your decisions. The list is long, and having metrics for these, as required under CSRD, furthers the benefits because what you measure matters[ii]. It provides evidence of effect. It improves decision making and it allows organisations to benchmark and therefore to aspire and to improve. All of which deliver two critical organisational asks, reduce risk and enhance investment, so the financially faint-hearted needn’t fear ESG.
The Importance of Delivering Positive Social Impact
Good governance is about making good choices and decisions. Doing so requires good information, insight and an ability to look to the horizon and anticipate what’s coming. Of course, regulation has a serious part to play in this, but do not underestimate the power of people too. There is a reason why many US-based corporates are ‘hushing’[iii] their ESG work, continuing their commitment to the principles and practices but not shouting about it in an unreceptive business environment. The point that ESG somehow hinders economic growth is unsubstantiated and when you consider that the 2017-2020 Global ESG Assets grew substantially[iv], the opposite is more likely to be true.
The bottom line here is the triple bottom line[v]. I’ve advocated that doing good is good for business since the 90s and there is endless amount of research and data to support this truism. But the importance of delivering positive social impact has never been so great as it is now and it is incumbent on all constituents of society – charity, community, voluntary, public, private – to continue our commitment and support of ESG in principle and practice, if not in name.
Written by Sheena Horgan, Director of Advisory Services, 2into3.
Get in Touch
If you would like to discuss your organisation’s ESG, social impact or governance needs, visit our webpage here or contact Sheena Horgan, Director Advisory Services at sheena.horgan@2into3.com.
Footnotes
[i] Double Materiality Guidelines
[iii] Guest Post – When Companies Go Quiet: Exploring the rise of Greenhushing – ESG Today
[iv] The Future of ESG: Under the Trump Administration – Michigan Journal of Economics
