ESG is in essence a simple framework to facilitate conscious consumerism. Alas simple is far from what happens in implementing it in businesses. As most firmly believe that its only purpose is to help businesses attract investors, many forget its true purpose is more aligned to allow organizations to build customer loyalty whilst assisting in improving financial performance coupled with ensuring that the business operations are indeed sustainable.
The term ESG officially originated way back in 2004 with the publication of the UN Global Compact Initiative's "Who Cares Wins". Yes its nearly two decades ago. It was the year I entered the field of academia.
Too often I see people trained in financial analysis acclaim themselves as ESG professionals and their analysis excludes the S of ESG. It should be noted that a reasonable ESG strategy should include ALL factors that enhance sustainability - actively reducing its carbon footprint, focusing on "going green", promoting and implementing true diversity that goes beyond box ticking and harnessing inclusive leadership that embraces attention to human rights, employee wellness and sustainable supply chains.
Yes we must focus our efforts on sustainability actions that benefit the business goals and enhance profitability, but we should not only look at those that are perceived as the easiest to do.
An effective ESG strategy can provide the pathway for an organization, big or small, to improve investor confidence, retain/build customer loyalty, optimize operating costs whilst ensuring employee wellness, make an impact on the community in which it operates and thus improve both asset management and financial performance.
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