ESG: The Crucial Link between Corporate Strategy and Sustainability

Environmental, Social, and Corporate Governance (ESG) refer to the three central factors in measuring the sustainability and societal impact of an investment in a company or business. These criteria help to better determine the future financial performance of companies. 

 

 

ESG has become a crucial link between corporate strategy and value impact of a company to sustainability, environment, social and governance issues. More than 1,500 investment managers have signed up to the United Nations Principles for Responsible Investment. The trend has driven a surge in the number of ESG indeces, making it the fastest-growing part of the market. With a direct impact on profits, stakeholders, market reputation, finance access, employees and investors, it has become crucial for a company to focus on ESG as a competitive advantage in their decision making. In the changing dynamic of businesses and industries due to the Coronavirus Pandemic, there would be many new factors that will be impacting the ESG ratings of companies. For the consumer goods industry, there would be drastic impact factors such as supply chains and online transition. The right steps taken by companies and the avoidance of short termism in these times will have a positive impact in the dimensions of sustainability reporting and ESG.

Where Honest Practices Matter

Honest sustainability practices have a crucial role in ESG’s as they contribute more significantly as value drivers and work in the stride of the company. Enhancement of meaningful impacts can make a much larger difference to the company’s corporate motives and help bring sustainability as a forefront of their business. The direct impact of ESG on stakeholders can act as an incentive gateway for the C Suite and board members to improve upon the limited involvement and focus on communicative ESG issue tracking. Senior board involvement can also help in the approval of big changes in ‘true’ sustainability, increase capacity and encourage a purposeful culture. The right sustainability reporting would also highlight the long-term commitment to responsible investment rather than a short-term marketing exercise. This can be done by getting the basics right, strengthening the core and effectively communicating the efforts.

The Guiding Analytic tools 

(Consumer Specific tool)

(Corporation Specific tool)

Q) How is it Meaningful ?

The combination of The Filter and The Monitoring Framework incorporate the green washing and negative practices to make sure that sustainability reporting does not provide a false sense of sustainability progress. The analytic tool incorporates all parts of the supply chain and to make sure that financial progress is done in an ethical, transparent and truly sustainable manner.

Contact

University of California, Berkeley 

College of Environmental Design 

ED 106 

Published May 2020

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