At this time of year, numerous articles, videos, and even classes about trends in various business management and entrepreneurship topics for the upcoming year start to emerge.
If you have been exposed to this type of content, you have probably read about ESG and its importance for businesses, especially in the coming years.
But what is so special about this three-letter acronym that it could change the future of your business?
Historical Context of ESG
The acronym ESG, Environmental, Social, and Governance (translated as ambiental, social e governança), relates to the measurement of an organization’s performance across these three pillars.
Although it has gained more prominence in recent years, the term originated in 2004 through a publication by the World Bank in collaboration with the United Nations Global Compact and financial institutions from nine countries, titled Who Cares Wins.
This publication resulted from a challenge posed by the UN Secretary-General at the time, aiming to gather insights on how to integrate ESG factors into the capital market.
From that point, the foundations for sustainable investment were established, which remains an urgent topic.
This urgency in recent years is due to an important factor: according to a report by the consulting firm PwC, by 2025, all assets in Europe will be in funds that consider ESG criteria.
Prior to this, companies did not view ESG as a favorable investment—after all, what would they gain from it? Now, investment funds have begun to prioritize this aspect, compelling companies to plan for their future and consider sustainability, both for the world and their own business.
Otherwise, they may find themselves excluded from the financial market, whether they are small, medium, or large enterprises.
So, Are ESG and Sustainability the Same Thing?
The term Sustainability is typically associated with the impacts a company has on its surrounding environment and its long-term outlook. While ESG is indeed related to Sustainability, they do not share the same meaning.
Sustainability refers to the macro environment, connecting governments, companies, and countries. Its concept is broader and has a long-term reach, as it focuses on opportunities and a comprehensive agenda for society and involved stakeholders.
ESG, on the other hand, pertains to the internal practices of a company; it is more specific and measurable, as its focus is on risk reduction. Thus, ESG practices work by transforming values and purposes into effective actions, providing reliable data and information for investors and consumers.
In summary, companies aiming to be sustainable need to become leaders in the pillars and purposes of ESG.
ESG in Your Company
Have you implemented ESG in your company? Regardless of whether your answer is positive or negative, there are some aspects to consider.
Remember, you may not have formally implemented ESG, but you might already be practicing it in your routine without even realizing it. Conversely, you could have officially implemented it but are neglecting the essence of its concept, meaning you are not truly upholding its pillars.
ESG practices must become part of the company’s routine and organizational culture. The company’s top leadership needs to study and believe in these principles, as this is the only way for other leaders and employees to internalize their importance.
It is of little use to have strong waste management practices without considering the policies and practices of administration and governance or the impact of the company on the society and community in which it operates.
To recap, the Environmental (E) pillar considers the organization’s interaction with its environment, energy sources, waste treatment and disposal, carbon emissions, among other aspects.
The Social (S) pillar examines the ways in which the organization impacts the society or community it belongs to, including its relationships with employees, safety, health, and workforce diversity.
Finally, the Governance (G) pillar focuses on governance policies and practices, diversity in boards and leadership, accounting processes, data protection practices like LGPD compliance, among others.
ESG with Interact Suite SA
At Interact, we take ESG very seriously, which is why we offer a comprehensive solution for companies to manage their programs.
This solution enables the systematization of strategic and operational planning, providing an integrated view of corporate results through strategic maps, performance indicators, and action plans.
With the tools available in Interact Suite SA, your business will gain greater clarity in social inclusion practices, alignment of strategic planning, transparency in data management, compliance with key ESG guidelines and international ratings, and much more.
Visit our website to learn more about our ESG solution.
Author:
Bianca Wermann
Journalist, Communication and Marketing Analyst at Interact Solutions.
