What’s the difference between ESG and sustainability?
In recent years, there has been a growing interest and awareness among businesses, investors, consumers, and regulators about sustainability and the environmental, social, and governance (ESG) impacts of corporate activities. While both terms overlap and have been used interchangeably, they have different scopes and focuses. Below are some of the notable differences between ESG and sustainability.
i) While the concept of ESG is quite new with a focus on the Environment, Social, and Governance pillars, sustainability is an old concept that can be traced back to ancient times, with a focus on the Environment, Social, and Economic pillars.
ii) ESG is a framework that helps stakeholders understand how an organization manages risks and opportunities around sustainability issues. Sustainability, on the other hand, is a broader concept that encompasses a range of responsible business practices that aim to create long-term value for all stakeholders, while minimizing negative impacts on the planet and society.
iii) ESG is a specific tool used to measure the sustainable performance of a company while sustainability is a principle that guides the strategy and operations of a company.
iv) ESG provides a standardized and quantifiable way to assess and compare the sustainability performance of different companies across sectors and regions. Sustainability, however, is more qualitative and context-specific, requiring a holistic and integrated approach that considers the needs and expectations of various stakeholders.
These are some key differences between ESG and sustainability. Despite these differences, however, both ESG and sustainability are important, not only for ethical reasons but also for business reasons. There is mounting evidence that shows that companies that perform well on ESG and sustainability metrics tend to have higher profitability, lower risk, better reputation, and greater customer loyalty. Moreover, ESG and sustainability can help companies identify new opportunities for innovation, growth, and differentiation in an increasingly competitive and complex market.
Therefore, it is essential to understand the meaning and implications of ESG and sustainability for your business and to adopt them as part of your core values and practices. By doing so, you will not only contribute to the global goals of addressing the environmental and social challenges we face today but also enhance your own resilience and competitiveness in the long run.
- https://link.springer.com/content/pdf/10.1007/978-3-8349-7043-5_1.pdf ↩︎
- https://www.businessgo.hsbc.com/en/article/demystifying-sustainability-and-esg
↩︎ - https://corporatefinanceinstitute.com/resources/esg/esg-environmental-social-governance/ ↩︎
- https://greenbusinessbureau.com/topics/sustainability-benefits-topics/esg-and-sustainability-your-101-guide-for-understanding-corporate-sustainability/ ↩︎
- https://www.mckinsey.com/capabilities/sustainability/our-insights/does-esg-really-matter-and-why ↩︎
- https://www.weforum.org/agenda/2021/09/3-paradigm-shifts-in-corporate-sustainability-to-esg/ ↩︎