The term “ESG”, which stands for environmental, social and governance, was part of the United Nation (UN) Global Compact’s “Who Cares Wins” initiative introduced in 2004 with an aim to raise “green” awareness among mainstream investors and analysts (source: UN Global Compact). Since then, the international investment community and UN have made many initiatives to incorporate ESG concept into core investment decisions and ownership practices, leading ultimately to not only sound and responsible investment decisions but also a sustainable future for both businesses and the community at large.
Organizations that fully integrate corporate sustainability strategy are able to strengthen their reputation and business viability. Nowadays, the general view is that corporate responsibility should extend beyond achieving short-term gains to cover considerations such as climate change, resource scarcity, public health and inequality.
Corporate Sustainability is fast becoming a keyword for listed companies and multi-national organizations alike. Major economies such as the United States, the United Kingdom, Australia and Japan have made consistent and reasonable ESG reporting mandatory for some industry segments or listed companies. In the Asian markets of Hong Kong, Malaysia and Korea, annual reporting on ESG status has become an important part of prudent management. The Hong Kong Exchanges & Clearing Limited has prepared ESG Reporting Guide which will be the recommended practices for all members. HKEx may raise the obligation level to “comply or explain” by 2015. Organizations that do not have an ESG strategy or reporting are now under considerable pressure to do so in order to stay competitive.
Organizations that embrace Corporate Sustainability strategy mitigate risks by setting policies, plans, procedures, training and communication programs for stakeholders on issues relating to pollution, waste management, water scarcity, hazards, workplace health and safety, as well as human rights. They set up a key performance indicator system to review status, monitor and record results, and perform audit on an ongoing basis.
The benefits are numerous: reduced risks, improved efficiency, facilitated market differentiation and expanded business opportunities. In essence, as more organizations commit to Corporate Sustainability practices, we are moving towards a sustainable global economy that incorporates long term profitability with social responsibility and environmental care.
Corporate sustainability development involves goal setting, implementation, performance measurement, ongoing management of change and regular reporting and communication. Securing cross company engagement and commitment is vital to the success of such development.