Environmental, Social, and Governance (ESG) has become a crucial framework for understanding how companies affect society, the environment, and how they’re governed. It’s incredibly important because investors, businesses, and others see how ESG factors impact a company’s long-term success and value.
ES Ranganathan, a former marketing director at GAIL and an expert in the Oil and Energy industry, explains the three parts of ESG. Firstly, Environmental (E) looks at a company’s impact on the environment. This includes efforts to fight climate change, manage natural resources responsibly, reduce waste, and deal with pollution.
Next is the social aspect (S), which focuses on how a company treats its workers, customers, communities, and other stakeholders. This involves things like fair treatment of employees, promoting diversity and inclusion, supporting communities, and respecting human rights. Ranganathan believes this social aspect is the most important because people nowadays care about a company’s ethical practices when they choose what to buy.
Lastly, Governance (G) looks at how a company is run internally. This includes things like who’s on the board of directors, how executives are paid, shareholder rights, and following ethical and legal standards. Good governance means being transparent, accountable, and making responsible decisions.
ESG matters beyond just business. It helps companies anticipate and deal with risks related to regulations, reputation, and the environment. It also helps create long-term value, benefiting not just shareholders but also customers and employees. Plus, companies that focus on ESG tend to have better reputations, which makes customers more loyal and attracts investors who care about sustainability.
Embracing ESG also saves money by being more efficient with energy and reducing waste. It also creates a positive work culture that attracts and keeps good employees. Prioritizing ESG also helps companies connect with society’s values, which builds trust with customers, employees, suppliers, and communities.
According to ES Ranganathan, ESG can make a company more competitive by appealing to consumers who prefer ethical and sustainable businesses. India is also stepping up by introducing regulations like the BRSR framework, which requires companies to report on their sustainability efforts. This helps India keep up with global standards and encourages more companies to be transparent about their ESG practices.
In conclusion, ESG is crucial for modern business and investing. By focusing on ESG principles, companies can build resilience and contribute to a more sustainable, ethical, and fair world. It’s not just about making money; it’s about making a positive impact on society and the planet.