In today’s rapidly evolving business landscape, the term ESG has emerged as a central theme. As global awareness of environmental challenges, social justice, and good governance grows, ESG has become a critical framework for companies to demonstrate their commitment to sustainability and accountability.
But what exactly is ESG, and why are companies racing to report it?
More than just a trend, ESG represents a set of principles that guide how businesses operate, focusing on their environmental impact, social responsibilities, and transparent governance. To understand its importance, let’s break down the scope of each pillar — Environmental, Social, and Governance — and see what they encompass.
- Environmental
Environmental issues relate to the quality and functioning of the natural environment and natural system, including:
- Biodiversity loss
- Greenhouse gas emissions
- Renewable energy
- Energy efficiency
- Natural resources depletion or pollution
- Waste management
- Ozone Depletion
- Changes in land use
- Ocean acidification
- Changes to the nitrogen and phosphorus cycles
- Social
Social issues relate to rights, well-being and interests of people and communities including:
- Human right
- Labour standards
- Health and safety
- Relations with local communities
- Activities in conflict zones
- Health and access to medicine
- Consumer protection
- Controversial weapons
- Governance
Governance issues related to the management of investee entities. Issues include:
- Board structure and size
- Diversity, skills and independence
- Executive pay, shareholders right and stakeholder interaction
- Disclosure information, business ethics, bribery and corruption
- Internal controls and risk management issues dealing with the relationship between a company’s management, its board, its shareholders and its other stakeholders
As ESG gains traction, companies increasingly adopt these principles to align their operations with global sustainability goals and meet the expectations of investors, regulators, and society. Understanding ESG is no longer optional—it’s a vital step toward building a responsible and resilient business for the future.
