Framing the sustainable business value: mapping Environmental-Social-Governance (ESG)

As with any concept, sustainability constantly intertwines with different practices, such as business value creation. Sustainability and its three mainstays (environmental, economic, and social) have been seen as a tool for organisations and their management systems to account for the climate, environment, and society. More recently, companies have been approaching the environmental, social, and governance (ESG) principles as an essential rendezvous mechanism for a business model. These ESG principles have come in this writing as a starting point for encompassing companies' values within sustainability criteria.

The importance of framing a sustainable business value, assisted by the ESG principles, can conduct business decision-making by a three-pillar ESG outline. I have delineated those three ESG pillars as: 'climate change', 'environmental sustainability' and 'sustainable development'. These three ESG pillars could be seen as a guide for value creation to produce business results (resources, strategies and processes).

Sustainability business value is relevant to the company's non-financial disclosures and comprehending stakeholders' needs and expectations. Henceforth, exceptional attention to 'sustainability materiality' will be essential when framing value as a business model.

Value-creation for a sustainable business could add 'rational' internal adoption and integration towards a better sustainability agenda. I suggest that determining specific ESG standards guides a clear, sustainable business value. Henceforth, sustainable business value will be framed under three main topics: importance to climate change, environmental sustainability, and sustainable development. Incrementally, I have associated each business value with its particular management system and sustainability materiality.

This arrangement encourages internal and external stakeholders to contextualise the specific characteristics and situations of the companies and how they contemplate and identify some aspects of ESG principles in shaping a business value.

The overarching agenda behind this proposal is to support the C-suite level, managers and stakeholders (internal-external) in the ongoing mapping of ESG principles by assessing its different 'pivotal standards' to structure a sustainable business value.

Conceptual background and rationale

ESG

As a principle, ESG is a standard system that includes environmental, social, and governance. The most common ESG elements/topics/factors (positive and negative) across the different standards are outlined below.

Environmental: matters that may have a positive or negative impact on the financial performance or solvency of an entity or individual:

·???????Greenhouse gas (GHG) emissions

·???????Energy consumption and efficiency

·???????Air pollutants

·???????Water use and recycling

·???????Waste production and management (water, solid, hazardous)

·???????Impact and Dependence on Biodiversity

·???????Impact and Dependence on Ecosystems

·???????Innovation in environmentally friendly products and services

Social: matters that may have a positive or negative impact on the financial performance or solvency of an entity ?or individual:

·???????Workforce freedom of association

·???????Child labour

·???????Forced and compulsory labour

·???????Workplace health and safety

·???????Customer health and safety

·???????Discrimination, diversity and equality

·???????Opportunity

·???????Poverty and community impact

·???????Supply chain management

·???????Training and education

·???????Customer Privacy

·???????Community impacts

Governance: matters that may positively or negatively impact the financial performance or solvency of an entity or individual:

·???????Codes of Conduct and business principles

·???????Accountability

·???????Transparency and disclosure

·???????Executive pay

·???????Board diversity and structure

·???????Bribery and corruption

·???????Stakeholder engagement

·???????Shareholder rights

From a practical perspective, the ESG principle is also a tool to measure and promote a sustainable business practice (people planet profit, economic, environmental and equity issues, environmental, social and economic') to categorise sustainability issues. First, one must acknowledge the ESG conception perceived as 'sustainable financial’-investment. Its framework is to obtain data from company portfolios and reach a consensus in the marketplace about which ESG factors of intangible financial materiality (topics that matter most to the organisation, shareholders and stakeholders) might impact its business model. These factors of ESG are intended to shape 'short-mid term growth, influencing capital movement.

As financial performance could be put before climate change or positive or negative impacts on society, the approach to ESG focuses on how to measure how much a sustainable company is worth.

Therefore, some general perceptions of the ESG debate as sustainable finance investing involve the following:

·???????A paradigm for aligning ESG strategies as a holistic resolution (the triangulation of three different topics)

·???????It is primarily used in the financial services industry

· Companies'inability and financial performance, providing data to investors to help guide their analysis

·???????Capitalising by assigning measurable value to financial material factors

·???????Financial market markets try requirements' to solve planetary boundaries and social well-being

·???????Balance sheet (profit/loss)

·???????Beating the market while solving climate change

·???????ESG without returns is not sustainable

·???????Financial tools for transnational corporations, not commonly containing small and medium-sized businesses

·???????No evidence of the relationship between ESG and organisational performance

·???????The potential impact on the company, not the company on the world

·???????ESG is not about ethics

However, over the past year, ESG has undergone paradigm distress, power relations and denial, shifting from prevalent norms of subjectivity and identity of the sustainability agenda into the politics of unsustainability . Correspondingly, another framework is not much more than straightforward accounting, ?an almost evangelistic extreme of sustainability championing 'sustainable consumption'.

The approach brought to this discussion is to line ESG as a guide to sustainability assessment concerning companies' value decision-making on 'non-tangible' issues. By this, sustainable business value implementation also entails engaging with companies' problems to initiate changes in behaviour, policies, and practices.

About well-ewell-encompassedtives for developing business value and its implications for sustainability, I am striving to move the orthodox sustainable finance investing ESG debate towards framing a sustainable business value. The mapping of the ESG could assist us in the current sustainability shift of the 21st-century business model.

The management system

For this document, the management system is the process between the management technical, financial, risk, impact and operations divisions- and the C-suite level - to identify resources and strategies perusing a business value. In the case of mapping the ESG, a decision for the management system faces considerable uncertainty related to ESG topics. With a set of resources, managers should choose a small group of material performance indicators that inform valuation impacts and consistently report data . This ESG approach must convey with the management system under an explicit avowal of a corporate sustainability purpose. Furthermore, a management system can assist corporate leaders in effectively applying a more structured approach to internal and external stakeholder engagement to determine materiality in the ESG context.

The overreaching idea behind the management system agenda is to know who will be accountable for business sustainability and positive or negative values—mapped by the ESG outlooks. Therefore, under the arrangement of the management system, I encourage the diversity between the three delineated ESG pillars as climate change, environmental sustainability and sustainable development, and how the technical, financial, risk, impact and operations divisions collaborate in determining what the ESG are in a company. For example, a risk exists when analysing the financing for a climate change project. Likewise, a risk exists when a company collaborates with a local community for water sanitation. The management system approach must differentiate based on who the technicians for each area are; and, operative manager will be in charge, whatevand er the outcome—each. Each pillar has its own risk, and none is above another. Bringing awareness to prioritising what the market or even the shareholders value the most might be balanced by the management system on what real value the company is attempting to reach.

A vital element of this management system arrangement is the approach to ESG reporting and its consideration of three types of reporting. This consideration will depend on the management system's how, where, or what they are attempting to measure; in other words, which ESG reporting intends to guide a particular sustainable value. Under this premise, specific business values can be highlighted within the delineated ESG pillars: climate change, environmental sustainability and s,ustainable development, reflecting a better-harmonised management system for an emeng business value. Values: Stainable business value should be considered an overreaching agenda for collaboration between departments. To illustrate, the finance manager in charge of the operational climate change agenda might have specific environmental ESG outcomes. However, the decision may be determined by a short-term impact rather than a mid-long term. This realisation within the management system is what business value might bring to the much-needed sustainability.

Sustainability Materiality

One key element in supporting managerial decision-making is the comprehension of sustainability materiality. This critical tool is a notable starting point, especially when identifying an ESG strategy to determine a sustainable business value.

Materiality refers to issues that can significantly affect a company (both positively and negatively). However, recognising and selecting material information on sustainable business value opens the complexity of the interconnectedness risk of human society satisfying its needs while staying within the environment. Furthermore, this interconnection unlocks the door to incorporating fundamental risk valuation of a company (positive or negative) based on the perceptions of the organisation's issues, the assessments of stakeholders, society, employees, and the decisions of crucial shareholders and senior management .

Materiality sustainability can be seen as a tool for elaborating on the conception and practical implications of how a corporation understands sustainability and reports its actions toward achieving sustainability. Therefore, I am incorporating materiality sustainability within the ESG mapping scenarios to assess climate change, environmental sustainability and sustainable development. In addition, better comprehension and accounting for business risks on sustainability or non-financial issues could help identify sustainable business value.

The critical challenge of materiality sustainability is to ensure comprehensiveness in covering all aspects of sustainability-material related: performance, stakeholder perspective/engagement, business drivers, and the context of the industry and the mapping-prioritisation of the material issues. For this last aspect, material issues are the essential perception as leverage for a tool to measure the quantitative and qualitative characteristics of business sustainability and ESG results. 'It should be noted that depending on their materiality, ESG factors that are not common across the provided frameworks could be equally important for institutions to consider '. This valuable analysis of instruinstrument'sity will directly or indirectly impact a business to create, maintain or erode its economic, environmental and social business values .

At the outset, the conception of the different sustainability materiality merits emphasises the following:

A.?????Single materiality: historically, from an accountability perspective, it is to ensure that the financial data that may affect investors are disclosed in financial statements. To simplify the materiality landscape (different varieties of ESG reporting), some standard setters, such as the new International Sustainability Standards Board (ISSB)[1] , identify single materiality as sustainability factors that are material to short-medium term enterprise value . In other words, single materiality is an approach to providing qualitative and quantitative analysis to determine which material should reflect the magnitude and nature of an item , thereby explaining how sustainable factors affect a financial condition.

ISSB'sISSB'sial captures business value in the abstract component of sustainable business. However, conceptually, the ISSB standards approach to materiality, based on the ISSB'sISSB'siality matrix commonly used in sustainability reports, captures the 'importance for stakeholders for the company' . Moreover, by framing single materiality under the common approach of ISSB, we should not be surprised that, by proxy, a common global approach to single materiality considers financial material as single materiality[2] , commonly emphasising the 'influence' an organisation has on climate change.

Under the value of climate change, single materiality encourages businesses to oscillate from a technical-finance-risk approach to one that considers social circumstances. Therefore, exploring the relationship between business practices and their value to climate change could provide further adoption of sustainable performance by decision-makers who need to determine what has the material priority of 'real 'impact' on their sustainability decisions. Moreover, the approach could help include more human dimensions and social dynamics, which are the core elements of any sustainable business value.

B.??????Double materiality: from the perspective of asset managers and financial advisers, it is relevant to environmental and social impacts and the company's financial risks. This focus on standard-setting material disclosure captures and mitigates sustainability risk through the commitment to integrate ESG data in its capital allocation process and the company's operations (contractors, supply chain, and stakeholders).

Concerning environmental sustainability, I am promoting the concept of double materiality as involved in not only the financial risks posed to the company but also the company's impact on the environment and society. As a positive outcome, double materiality aids the understanding that having a positive impact on society and the environment is not only the right thing to do but a requirement for long-term business success. In other words, double materiality is an assessment approach that accounts for how sustainable factors affect a firm's financial value and considers how it involves its external material risks.

On the double materiality landscape (different varieties of ESG reporting), some standard setters, such as the Global Reporting Initiative (GRI), consider double materiality a tool to generate impact on the economy, environment and society. Essentially, it does not deprioritise the financial material, environment, and society.

Regarding how the double materiality perspective guides the assessment of value for environmental sustainability, the GRI criteria presents an option for the management system to collaborate between the risk and the operational departments and, perchance, shift invest investors about short-term financial-single materiality as an altered strategy to mitigate long-term environmental and social challenges.

Under the same GRI narrative, the practice of double materiality enhances proxy disclosure, highlighting organ organisations' transparency and commitment to avoid greenwashing their initiatives regarding environmental sustainability. Likewise, double materiality could positively add value to corporate accountability and provide a simplified approach and guidance for SMEs, especially involving external stakeholder representation.

C.??????Impact materiality: is commonly interpreted as 'information on the reporting company company' on the economy, environment and people for the benefit of multiple stakeholders, such as investors, employees, customers, suppliers and local communities . This premise is based on the previously described double materiality GRI standard. Under the GRI principle, materiality encompasses the dynamics between financial materiality (topics that matter most to the organisation, shareholders and stakeholders) and impact materiality (matters that affect the economy, environment and people).

Depending on who-why-what to 'impac'' are 'ueries in which the double materiality of the GRI standard was not explicitly built to navigate. At this point, I distinguish the dimension of 'impact' materiality' from' materiality' to address the meaning of impact in the context of a business value. From a critical approach, I endorse impact as actors/institutions touching the everyday lives of individual and collective subjectivities in myriad ways by shaping major social institutions, framing policy responses and influencing social outcomes in ways that, although not always immediately perceptible, are nevertheless significant .

As an established standard for creating impact, the United Nations Sustainable Development Goals (SDG) has become the global agenda for a plan of action for people, the planet and prosperity . As an impact standard setter for the simplicity of this document, the SDG addresses the global challenges involving society, recognising that international approaches must go hand-in-hand with strategies that build economic growth and manage a range of social needs. These needs include education, health, social protection and job opportunities while tackling climate change and environmental protection (a collection of 17 interlinked global goal s).

The conceptual foundation of the SDGs has also been contained under the SDG Disclosure (SDGD) benchmark. Its recommendations principles are drawn from the International Sustainability Standards Board (ISSB), Integrated Reporting Framework and the GRI standards. To improve the impact of materiality indicators on the planet and humans, the SDGD suggests that the ISSB and the GRI standards alone need to be more?adequate in reporting on an organisation to consider both risks and opportunities resulting from sustainable development issues. Likewise, the implications for value creation (and value destruction) and impact on achieving the SDGs '.

I am addressing the SDG Disclosure principle; the organisation's contribution to achieving the SDGs through its strategy and business model has established a standard for creating impact with a global agenda for a plan of action for people, the planet and prosperity. This disclosure underpins sustainable development for six capital values: financial, manufactured, intellectual, human, natural, social and relationship.

Leveraging the model of impact materiality assessment, the global platform of SDGs involves long-term net value creation for organisations and society. Playing a significant part in the global environmental, social and sustainable governance commitment, 'the SDGs [have been built] on decades of work by countries and the UN, and are also aimed at the private sector. Achieving the SDGs will be a key driver of economic growth [as we advance], ultimately the only structural source of long-term financial returns . The impact approach used by the SDG standard (pending final approval in March 2023) could guide management system decision-making to improve an organisation with a multi-level conceptualisation of global challenges. In addition, impact materiality, as a contemporary corporate status quo mindset, may influence different business goals and parameters for real impact.

Sustainable business value

It can be understood as the attitude and functioning of companies within political, social and economic criteria, reconsidering the local context (ecosystem-society) beyond their operations (dynamism with corporate social responsibility). In short, the sustainable business value is to meet current and future generations' resource and service needs without compromising the health of the ecosystems that support them .

To explain how mapping ESG business sustainability can assist business value, I expand on the intertwining of climate change, environmental sustainability and sustainable development as an organisational mindset. This value-added point of view is captured in Figure 1[3]

Figure 1: Supporting sustainable business values, intertwined with management system and sustainable materiality, by the mapping of ESG reporting standards

David Chávez Sáez V2.0 (07-July-2023). Source: Adapted from Julien Rivals (v.2, 21-Dec-2021).

A.?????Value to climate change: 'vulnerability' to climatic disasters, political and economic dynamics on future implications, 'adaptable' resource allocation and development of knowledge technologies .

Conventionally integrated into climate change mitigation, air quality, sanitation and drinking water, heavy metals, waste management, biodiversity and habitat, ecosystem services, fisheries, acid rain, agriculture and water resources.

In generating business value related to climate change, there needs to be more synchronism with sustainability as it is seldom listed among stressors that might influence the business approach. The lack of association has historically been defined primarily because of the emphasis on terms of alleviation. In parallel, the financial sector and business managers have been seeking to understand whether investments in climate change are paying off. As a good illustration, this managerial approach is caused by what is considered to be measured. For example, whether the local community has enough water for the company and not if the company is stressing the local water supply. This example illustrates the limitation behind the need for a sustainable approach to climate change and how business value is framed. Climate change values are an essential business pillar. However, the sensitive business tactic of approaching climate change as the only mission or vision for the planet should be seen as something other than an absolute business value.

B.??????Value to environmental sustainability: condition of balance, resilience and interconnectedness that allows human society to satisfy its needs while neither exceeding the capacity of its supporting ecosystems nor diminishing biological diversity to continue regenerating products/services necessary to meet these needs .

It is conventionally integrated into animal protein, agriculture-ecological, biodiversity, social needs (water-electricity-goods), regenerative capacity, reuse-recycling, low-impact transportation, biofuel, conservation of human resources, population management (urban/rural) and infrastructure.

In producing business value to environmental sustainability, new laws and regulations governing the environment are being developed inside the European Union - Corporate Sustainability Reporting Directive and in the United States Securities and Exchange Commission. These new parameters look after 'natural capital' to improve the financial and impact sustainability connection. Likewise, they are also looking inside the functional unit of the management system, possibly influencing the shift of environmental managers to pursue the achievement of regulatory compliance-governance.

Arguably, as a conscience thought, value to environmental sustainability has difficulty being achieved under the win-win conceptual claim: 'negawatt revolution', 'pa's 'o be green', 'fortune at the base of the pyramid', 'creating shared value', 'reverse innovation' and 'circular economy'. The promotion by regulator institutions of an annual report on environmental sustainability could improve the organisational capacity to compromise and perhaps cooperate with other companies within a mid-long strategy approach.

C.??????Value to sustainable development: The goal of economic and social development is to meet the needs of present society without compromising the ability of future generations. The idea of impacting the limitations on the environment to meet current and future needs has definitional ambiguity . Environmental and socio-economic issues bring mix-up to the conventional integration of what is to be sustained and what is to be developed:

What is to be sustained:

·???????Nature (earth, biodiversity, ecosystem)

·???????Life support (ecosystem services, resources, environment)

·???????Community (cultures, groups, places)

What is to be developed:

·???????People (child survival, life expectancy, education, equity, equal opportunity)

·???????Economy (wealth, productive sector, consumption)

·???????Society (institutions, social capital, states, regions)

Most determinations in creating business value for sustainable development are deductive or top-down. First, a negotiated business strategy is achieved, and then definitions drive their choice of indicators to emerge from the analysis as powerful statistical predictors. As a good illustration, a 'rational' approach has been taken on the not explicit global policy on the net zero emissions time frame (15–25 years, the year 2030, the year 2050, and the year 2060 for China). Equally important, there is no clarity on whom a stakeholder is—clients, the highly impoverished or the eroded middle class.

As a reflexive awakening of sustainable development, the executive compensation approach to measuring intrinsic goals might not be the mechanism to recognise the limited public-private interaction concerning economic cooperation, government tax, spending policies, income inequalities and alliance with the third sector. Better incorporation of the state, market, and community is needed to develop tools/policies/products for integrating social conditions into market economics and issues that fit into the context of particular local, regional, and national policy agendas.

Recognising that global policies can generate the business value of sustainable development can promote a long-term business strategy by recognising this central insight. In other words, a sustainable development business must be acquainted with multiple worlds.

Conclusion

From a business value perspective, the organisational approach presented in this text serves as a scheme for standardising decision-making, encouraging C-level division leaders, managers and designated personnel to apply well-aligned ideas to create responsible, sustainable projects. Above all, to provide additional structure while striving for an ESG significance to identify the drivers of sustainable business values. Conceivably, managers will carry out their jobs effectively and consistently according to organisational expectations—employees want to know which 'sustainable business value' is expected of them.

The management system approach could leverage a practical and realistic ESG and materiality integration mapping with a sustainable business value focus. As an exemplification, a technical manager (specialist in climate change) measuring carbon dioxide (CO2) emissions does not have to comprehend social development in depth. Subsequently, the need for more ability might create an indirect organisational risk. However, assisting the overarching agenda behind ESG strategy, the management system might recognise how risk is reflected in each value pillar and not, conveniently, highlight financial-climate change characteristics as the main significant risk.

On the other hand, a materiality assessment must support the business integration of ESG standards to improve business sustainability. By pinning down the business value, the materiality approach will conceivably target qualitative and quantitative data on the mission-oriented implementation behind business performance and impact performance. These data or metrics may open the door to the central paradigm of ESG, which is ESG as a sustainable finance investing management tool and its potential impact on the company, or ESG focuses on its effect on the world and what 'value' it intends to promote.

In the shift from prioritising the financial aspect of sustainability besides the external risk component of the economy, environment and society, the three sustainable business values pillars could promote and restore the critical triangulation between the state, communities and businesses to improve who/how/what is a 'real 'impact'. In 'navigating sustainable business value creation, an ESG mapping model could endure this change by asking what business is made of and how business is done by supporting the involvement of a mid-long-term value for the organisation and society.

In identifying our business value, for example, the Corporate Sustainability Reporting Directive (CSRD) (designed for value to environmental sustainability/double materiality/risk-operation management) will become a regional regulation that is mandatory in the European Union (EU), needs to comply by July 6, 2024, as a sustainability reporting standard. Its design improves money flow towards sustainable activities across the EU by enabling investors to reorient investments towards more sustainable technologies and businesses. Simultaneously, ESG reporting might become a simple procedure, as CSRD promotes digital tag-reported information, promising much more meaningful, comparable non-financial information for investors and other stakeholders. This new requirement from the EU regional governance compliance opens the door to accelerating the sustainability reporting process and the approach to a specific business value - the CSRD expressly is framed to address environmental sustainability.

The ESG principle, as a guide to sustainability assessment concerning compancompanies'ion-making on measuring 'non-t'ngible', sti'l needs to find an affiliation with sustainable business values and the context they intend to impact - focus on which ESG indicator could support the pathway towards a specific real impact value. The amalgamation of value to climate change, value to environmental sustainability and value to sustainable development could be the right consensus strategy that each business might promote.

Finally, in the 19th and 20th centuries, companies were intended to generate innovation and improve our lives. However, as there is a push from international and local regulators, society, and customers, corporate legitimacy is attempting to tick all the ESG boxes. Under pressure for a genuinely global impact, climate change, environmental sustainability, and sustainable development might become the drivers for contemporary 21st-century businesses in their search for value.

----------------------------------------------------------------------------------------------

[1] In 2021, the Value Reporting Foundation established the new International Sustainability Standards Board (ISSB), home to the Integrated Thinking Principles, Integrated Reporting Framework and the Sustainability Accounting Standards Board (SASB). All previous standards are consolidated under the International Financial Reporting Standards (IFRS) Foundation.

[2] As ISSB moves to centre stage, one question will need to be answered: should sustainability reporting mainly become a tool for investors to minimise risk and seek financial opportunities, or should it serve as a more profound indicator of corporate responsibility, ensuring companies act in the broader, long-term interests of society? Will governments and regulatory bodies adopting ISSB as a reporting standard be ready to ensure companies account for their impact on the well-being of all or their investors?

[3] Assisting the overarching agenda behind ESG strategy, different pivotal frameworks, regulations, standards, benchmarks, and recommendations for periodic reports.

Two different classification schemes are represented (can be applied over a broad semantic spectrum, open to interpretation).

The SFDR and the CSRD are all relevant, with the EU Taxonomy ("green" share") for" sustainability disclosure.

There are many other frameworks, standards, benchmarks and certifications to consider. Some are at the prototype stage, and others are mainly established for specific industries and contexts.