ESG as an Operational Framework

2024-02  Environmental, social and governance, or short ESG, refers to set of quantifiable parameters that can be used to measure the impact of an organisation, event or other activity on its surroundings, stakeholders and society.

From CSR to ESG

Corporate Social Responsibility (CSR) has been the focus for a qualitative measure of the impact activities, in particular businesses may have on society and stakeholders. ESG as an operational framework provides the ability to expand impact considerations to a quantifiable way of measuring. Accordingly, environmental, social and governance aspects range from emissions, resource consumption to sourcing, community relations and questions of transparency and business ethics (see Figure 1).

Figure 1  ESG Framework (adopted from [1])

Why ESG matters

According to  2021 study, the majority of ESG-focused investment funds do outperform the broader market [2]. Earnings growth of businesses with top tier ESG ratings show a higher contribution to returns and dividends [1].  When considering other reporting and management systems, for example, LEAN, ISO and governmental reporting requirements, an ESG framework properly linked to the operations can provide ability to integrate the various reporting and management systems.

Additional information

If you like to understand further details in relation to ESG and are interested in the integration with other governance regimes, please contact chemneera.

References:
[1]  Visual Capitalist/MSCI ESG Research (2020). https://www.visualcapitalist.com/fact-check- the-truth-behind-five-esg-myths/ 
[2]  Atz U., Clark C., Whelan T. ESG and Financial Performance: Uncovering the Relationship by Aggregating Evidence from 1,000 Studies. NYU Stern Center for Sustainable Business (2021)