What is ESG and its History?
Welcome to journey of Demystifying ESG and taking it to the next level.
Before we focus on the current landscape of ESG it is necessary that we look a little back in time and see where all of ESG started.
What is ESG?:
ESG stands for Environmental, Social, and Governance. It’s a framework used to assess a company’s commitment to sustainability, social responsibility, and ethical practices.
In today’s dynamic business landscape, the importance of Environmental, Social, and Governance (ESG) considerations cannot be overstated. ESG factors have emerged as key determinants of long-term business success, shaping investor perceptions, consumer preferences, and regulatory frameworks. Companies that prioritize ESG initiatives not only mitigate risks associated with environmental degradation, social inequities, and governance failures but also unlock opportunities for innovation, growth, and resilience. Moreover, in an era defined by increasing societal awareness and stakeholder activism, organizations that demonstrate a commitment to sustainability and ethical business practices are better positioned to build trust, enhance brand reputation, and drive sustainable value creation. Ultimately, integrating ESG principles into business strategies is not just a moral imperative but a strategic necessity for navigating the complexities of today’s interconnected world and securing a sustainable future for generations to come.
The Rise of ESG: From Buzzword to Business Imperative
An interactive timeline showcases key milestones or events that have propelled ESG to the forefront of business conversations. Examples could include:
The emergence of major sustainability reports (e.g., Brundtland Report)
In 1983, the United Nations established an autonomous body to investigate the connection between human activity and the environment, and what they meant for economic and environmental policy. This organization was the Brundtland Commission, formerly the World Commission on Environment and Development. It was their 1987 report that catapulted the concept of sustainable development to the forefront of global discourse.
Global climate change agreements (e.g., Paris Agreement)
Implementation of the Paris Agreement requires economic and social transformation, based on the best available science. The Paris Agreement works on a five-year cycle of increasingly ambitious climate action — or, ratcheting up — carried out by countries. Since 2020, countries have been submitting their national climate action plans, known as nationally determined contributions (NDCs). Each successive NDC is meant to reflect an increasingly higher degree of ambition compared to the previous version.
These agreements place pressure on businesses to reduce their carbon footprint and adopt practices that mitigate climate change risks
Increased emphasis on social responsibility by consumers and investors
From Humble Beginnings to Modern-Day Necessity
Pre-1980s: While not explicitly termed “greenwashing,” misleading claims about environmental practices existed. Companies might tout their environmental efforts despite contradictory actions.
1980s-1990s: Environmental awareness rose significantly, with events like the rise of environmental social responsibility (ESR) and the emergence of the Socially Responsible Investing Forum (SIF) marking a turning point.
The Dawn of ESG and its Rise to Prominence
1990s-2000s: The concept of ESG gained traction. The Valdez oil spill in 1989 and the publication of “Who Cares Wins” by John Elkington in 1997 are cited as significant contributors. The latter book emphasized the connection between environmental, social, and financial performance.
2000s-2010s: Integration of ESG considerations into investment decisions grew. Initiatives like the UN Global Compact and the launch of the Sustainability Accounting Standards Board (SASB) in 2011 further solidified ESG’s importance.
2020s-Present: ESG is now considered mainstream. Regulatory landscapes are evolving to incorporate ESG factors, and stakeholders are increasingly demanding transparency and accountability from businesses regarding their ESG performance.
Excess Resources if interested: https://thesustainableagency.com/blog/the-history-of-esg/