Does ESG matter?
ESG has been a term since 2005 however in recent times it has gained some traction!
ESG (Environmental, Social and Governance) has been receiving more Google searches and more resources in businesses are being put toward improving ESG in the business world. More than 90% of the top 500 listed companies now publish ESG reports in some format. In some countries elements of ESG reporting are mandatory or at least under consideration.
Obviously, a major part of ESG growth to date has been driven by the environmental component. However, other areas have been gaining traction and in particular social responsibility. The world is also moving towards an international understanding of what should be included and exactly what is being measured.
In the past ESG is seen as a distraction to business or it's not feasible because it’s too difficult or is not measurable (at least to any practicable degree) and there has been no meaningful relationship to financial performance. Although there is a correlation between those that have a high ESG performance and how they perform in the broader market.
Another issue for ESG to overcome is that of “greenwashing”, whereby businesses say they are going to go down the ESG route however don’t really do it in the spirit intended. Whilst all of this is and has been true in the past, the future is changing, and technology and regulations and legislation are slowly catching up. Everything is indicating that ESG considerations are becoming more important in companies’ decision making. Key to this is that team members are increasing prioritising belonging and inclusion as they choose who to work for, and ESG reports produced by business are helping people make employment decisions.
I think we need to remember that ESG is a journey and there will be bumps along the way. The measurement issue is still a work in progress, however there has been advancements and this will continue so that the ESG measurements will be improved over time so you can see trends of improvement, which is being forced by different regulations having more granular requirements. ESG will help future proof organisations and help deliver meaningful impact over the long term…but like all good things it will take time.
To find out more about our ESG journey at Power Tynan and how we can walk with you on yours contact Amanda Kenafake, CEO & Executive Director at ak@powertynan.com.au or 07 4688 8400.
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