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Not so long ago, Corporate Social Responsibility (CSR) was the buzz word. It is about good corporate citizens, which through their efforts and contributions to community, make a positive impact on its employees, consumers, the environment and wider community. While businesses may do well while doing good, in reality the efficacy of CSR programmes for stakeholders is less definitive because the actual impact is usually not measured or quantified.

ESG Criteria

Today, investors are expecting greater transparency by companies on the impact of their business on the environment and wider community. Environmental, social, and governance (ESG) criteria are used increasingly by investors to evaluate companies for investment. It is estimated that a quarter of the world’s professionally-managed investment funds now only invest in companies that demonstrate solid ESG credentials. Environmental criteria consider how a company uses natural resources and impact the environment. Social criteria examine how it manages relationships with employees, suppliers, customers, upholds health and safety and protects customer data. Governance deals with a company’s leadership, executive pay, board diversity, business ethics and shareholder rights. ESG reporting is increasingly mandatory in many jurisdictions. ESG reports are usually published as part of Sustainability Reports or Annual Reports.

Why Is ESG Important?

Companies with high ESG performance have an edge in long-term sustainability. They are more likely to have better financial performance. They have less volatile earnings and offer better returns. They are more adaptable to evolving technology and regulatory disruptions. With ESG practices, companies can gain the trust of investors and deliver value to stakeholders. Ultimately, companies must put ESG in the centre of their business sustainability strategy to navigate sudden risks like the Covid-19 pandemic or long-term risks like climate change.

Inaction is not an option. 

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