Better for the World, Better for Business

 2022-11-08 By: Elroy Yao

Organizational Environmental, Social, and Governance (ESG) efforts have often focused more on the Environmental aspect with many of them pledging for carbon reduction and eventually net-zero in the near future. However, Social and Governance have often been overlooked or overshadowed by the more eye-catching Environmental pledges.

CFA Institute included several key metrics that outside observers can use to measure the organizations’ ESG performance such as their efforts in reducing carbon emission and increasing energy efficiency, improving customer satisfaction and employee engagement, preventing bribery & corruption, and many more. Therein lies the challenge for gauging the S and G of organizational ESG efforts as many of the metrics are more qualitative, subjective, and more human-focused. On the other hand, many organizations can announce their E efforts to great fanfare as they are easier to quantify and often are more eye-catching.

This is not to say that Environmental efforts is no longer important. In fact, as the global energy consumption will only go up, it is vital to promote green energy as well as net-zero efforts. For example, Ms. Prerna Soni, Vice President of Invest India stated in the InnoVEX FORUM 2022 "Attaining Climate Neutrality through Green Energy & Tech" that renewable energy generation in India costs approximately USD 0.02 per kilowatt as the Indian government practices viability gap funding for every new renewable energy project. By providing a low cost, low carbon, and high reliability energy source, organizations can definitely approach net-zero quickly and might even exceed their original plans (if any).

In the InnoVEX FORUM 2022 on ESG, titled "Bridging ESG and digital transformation - Initiate the "beyond E" generation"; Jeffrey Wu, Founder & CEO of WeMo Scooter shared the idea that ESG should start from the governance side all the way from the top and as part of the corporate strategy. Incorporating or introducing ESG goals should happen at the beginning or at least as soon as possible to make sure that the organization can actively make efforts to achieve them. Today, Social and Governance are important aspects as people hope and want the companies they engage with to do more than just offer products or solutions. There are already plenty of coverages on the effect of positive social engagements on companies and according to a research by Stanford, diversity and equality are great for companies. Not only do diversity and equality bring forward and promote innovation & creativity; shareholders generally react positively to the news with rising stock prices; and above all: it is ethical.

Organizational cooperation will be important to promote ESG as different organizations/ corporations will have different expertise and resources that they can leverage. At the same time, it is also important for businesses to remember that ESG can positively affect financial performance. In fact, according to a report from NYU Stern, "Sustainability strategies implemented at the corporate level can drive better financial performance through mediating factors". From a business perspective, every aspect of ESG is objectively good; not only for the environment and for people, but also financially beneficial. Organizations might take time to make significant steps in ESG, but getting an early start will mean making a better future possible.

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