Breaking Down The Key Factors Of ESG Versus Sustainability
Numerous individuals use ESG and sustainability interchangeably, including environmental experts and business leaders. This idea makes sense because both share the same grail of revamping a company’s business activities to augment profits and win approval from regulators, investors, and customers.
However, there are several differences you must be aware of between the two initiatives, mainly if you are in charge of implementing them in your business. ESG is a more specific and data-driven term focused on three dimensions (environmental, social, and governance) of interest for asset managers and investors.
Sustainability is a broad term that fringes a company’s efforts to create long-term investor value via a business system proficient at operating indefinitely. The following are vital factors that elaborate on the difference between sustainability and ESG.
Critical Factors Of ESG Versus Sustainability
1. How ESG And Sustainability Differ
It is challenging to explain the difference between sustainability and ESG– even for the government. A recent scheme from SEC disdains to elucidate ESG or any related term concerning enhanced divulgence requirements for ESG funds.
Even though the meaning is vague, the difference between sustainability and ESG is the end goal. A sustainable enterprise aims at operating for as long as possible without destroying its environment, while an ESG-centered business focuses on specific environmental, social, and governance issues.
The difference between sustainability and ESG is also in the metrics and standards set by investors, lawmakers, and reporting organizations. ESG reporting metrics and benchmarks attempt to weigh hard-to-quantify and collate variables like employee satisfaction, while sustainability reports focus on quantitative metrics like tons of carbon emitted.
2. The Difference Between Sustainability And ESG Without Distinction
A bit of the reason ESG and sustainability are often used correspondingly is that they both focus on achieving the same goals through various means. They both seem to mobilize businesses to make socially conscious decisions, and actions with sustainability and ESG seem closely interlaced on this score.
The difference between sustainability and ESG is how both try to achieve the same goal of operating a business that respects social and environmental concerns through different strategies. Sustainability finds a balance that ensures an enterprise runs for as long as forever, aiming to reduce its impact on the world.
On the other hand, ESG also aims to create a conducive environment in a business by being more specific and data-driven to achieve its purpose.
3. From Sustainability To ESG
Between the 19th and 20th centuries, modern sustainability gained ground to predate the newer ESG concept. Renewable resource champions, conservationists, and the corporate responsibility movement are integrated under the same umbrella of sustainability in the 21st century.
In 2004, the UN collaborated with major financial institutions to generate a framework for combining environmental, social, and governance values into asset management and business practices. The concept of ESG was developed and modified from the importance of sustainability with a broad indication of an enterprise’s environmental footprint and social performance.
Conclusion
Despite the differences between sustainability and ESG, they remain crucial global strategic considerations for diverse companies. The ESG has a holistic framework customized to make businesses thrive as they face social and environmental challenges. The sustainability of a business attracts more customers, investors, and employees to make empowered decisions.
