Corporate ESG vs Sustainability: What's the Difference and Why It Matters

Corporate ESG vs Sustainability: What's the Difference and Why It Matters

ESG and Sustainability are two relative yet distinct concepts, often used interchangeably in the context of the corporate world.

In this article, we will explain the difference between ESG and Sustainability, and why they both seemingly different yet pivotal for adoption now and the sustainable future of enterprises.

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What is ESG?

ESG stands for Environmental, Social, and Governance, and it is a framework that measures and evaluates the performance of companies to assess a company's environmental, social, and governance impact. For instance, ESG criteria can include factors such as:

·?????? Environmental: How does the company manage its carbon footprint, waste, water use, energy efficiency, and has the company undertook sufficient responsibilities avoiding risks to the environment?

·?????? Social: How does the company treat its employees, customers, suppliers, and communities? Does it promote diversity, inclusion, human rights, and social responsibility?

·?????? Governance: How does the company conduct its business ethically and transparently? Does it have effective board oversight, anti-corruption policies, and stakeholder engagement?

ESG is a measured assessment of sustainability benchmarked against these metrics.

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What is Sustainability?

Sustainability is a holistic operating model of a company that is aligned to the economic, social, and environmental needs of the present without compromising the future to meet their own needs. Sustainability is other words, is essentially, the long-term viability and resilience of a company and its stakeholders. For instance, Sustainability can include aspects such as:

·?????? Economic: How does the company create value for its shareholders, customers, and society? Does it innovate, grow, and compete fairly and efficiently?

·?????? Social: How does the company contribute to the well-being and development of its employees, customers, and communities? Does it support education, health, and social causes?

·?????? Environmental: How does the company protect and enhance the natural resources and ecosystems that it depends on and affects? Does it reduce its environmental impact and foster a circular economy?

Sustainability, though based off on ESG factors, extends beyond Environmental, Social and Governance causes. More importantly, Sustainability is more than just doing good and doing well, it is in fact about embracing the right values into a company’s business model, ensuring the Sustainability and resilience of the company for decades to come.

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Why Does Adopting ESG and Sustainability Matter?

ESG and Sustainability matter because they reflect the changing expectations and demands of the society and the market. Consumers, investors, regulators, and other stakeholders are increasingly aware of the environmental and social challenges that we face, such as climate change, inequality, and human rights. They are also looking for companies that can provide solutions and demonstrate leadership and accountability in these areas.

ESG and Sustainability can help companies improve their performance, reduce their risks, and create opportunities. By adopting ESG and Sustainability practices, companies can:

·?????? Enhance their brand image and reputation

·?????? Attract and retain customers, employees, investors and investments

·?????? Increase their operational efficiency and cost savings

·?????? Innovate and differentiate their products and services

·?????? Comply with current regulations and standards

·?????? Mitigate and adapt to environmental and social risks

·?????? Contribute to the global goals and initiatives, such as the United Nations Sustainable Development Goals (SDGs) and the Paris Agreement

·?????? Reduce Carbon Tax, the initial carbon tax rate for Singapore is set at $5 per tonne for 2019 to 2023, to provide a transition period for businesses to adjust and would dramatically increase to $25 per tonne in 2024 and 2025, $45 per tonne in 2026 and 2027, and is slated to increase to $50 to $80 per tonne by 2030. This works out to be a 10 to 16-fold increase, which outlines the emphasise and urgency, now than ever before for businesses to lower their carbon emissions.

Conclusion

ESG and Sustainability is therefore not only about a company’s moral compass or lofty ideals about doing good for the planet and society (whom includes your customers, market, and consumers), but also materially good business acumen, projecting a long-term outlook, creating sustainable value and ensuring the future success of companies and preserving the interest of their stakeholders.