The Emergence of ESG in Current Business Strategy
In the past 40 years, companies have evolved to address issues that have a long-term impact on business operations. From the Environment, Health & Safety (EHS) methodology used for employee and environmental regulations in the 1980s to Corporate Social Responsibility in the 2000s, companies have now been rapidly integrating ESG: Environmental, Social, Governance frameworks.
ESG is a strategy that companies use to integrate environmental, social, and governance issues to manage risk, develop daily business procedures, and sustain long-term value.
Here are some key environmental, social, and governance issues addressed by companies and their impacts:
Why is ESG so important?
ESG strategy gives companies a competitive advantage in many ways. For instance, it allows for better risk mitigation in long-term and basic operations. It also allows companies to identify new opportunities such as customer markets or maintain a high employee retention, reputation, and stakeholder trust.
More and more stakeholders are looking at ESG factors to determine their interest in a corporation. Investors have been requesting more disclosure in these factors, supply chain partners look at labour relations and product safety, while the Millenial and Gen Z workforce have the expectation that their employers share certain environmental and social values.
What is the Future of ESG?
As ESG continues to grow, investors and corporations are ensuring that the framework is implemented and standardized in various industries and companies. Investor initiatives like Climate Action 100+ are driven to hold high greenhouse gas emitting companies accountable and take action, while United Nations Global Compact calls on corporations to align their businesses to social and environmental principles.
It is evident that more and more stakeholders and shareholders are calling for the implementation of ESG strategy and transparency to the public about what these integrations look like. As Millennials and Gen Z begin to dominate the workforce, the call for action will only be more prominent and companies will have to consider these factors for long-term success.
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Written by: Emma Catalan