Rethinking ESG: Beyond the Investment Market ??

Today I want to talk about ESG.

The acronym short for Environmental, Social, and Governance, has recently come under scrutiny in a Financial Times article that paints a bleak picture of its future. In alignment with a prevailing viewpoint in the media, the author contends that ESG has encountered a series of challenges, primarily based on basic flaws within the framework.

However, I believe, it's essential to look beyond the investment market alone and appreciate the nuanced role ESG plays in our evolving world.

Understanding ESG: More Than Just an Acronym

Before we delve into the reimagining of ESG, I want to do a quick rundown of what each part of ESG means to me. The three pillars encompass:

• Environmental: This pertains to a company's impact on the planet, such as its carbon footprint, resource usage, and efforts to mitigate climate change.
• Social: The social aspect focuses on how a company treats its employees, customers, and communities, addressing issues like diversity, labour practices, and community engagement.
• Governance: This element examines a company's internal controls and structures, including board diversity, executive compensation, and shareholder rights.

ESG Goes Beyond Investment Returns

ESG, like in the FT article, is often reduced to a key performance indicator for investment success and returns. However, it's much more than that.?

ESG started as a measure of goodness, built around principles for responsible investing. It's about defining what "good business" looks like, not just making a quick buck through investors and KPIs. To me it is clear that returning to this definition of ESG, is key to entering the next phase of this crucial metric.?

ESG's Evolving Life Cycle

ESG is still in its early stages of development. Like any evolving concept, it has faced revisions and adaptations over time. Perhaps the best analogy to use here is Gartner’s Hype Cycle , which drills down into the five key phases of a technology’s typical trajectory:

In phase 3 (which Gartner calls the Trough of Disillusionment) enthusiasm for new tech wanes due experiments and implementations yielding unsatisfactory results. Technology producers either streamline their offerings or face failure. Arguably we can see ESG currently being within a similar stage of its life cycle. Consumers and experts alike are becoming frustrated with the ‘quick wins’ it has delivered for fund managers so far, without making any meaningful impact.?

In order to get away from the narrative of ESG being a bogus buzzword, businesses need to live out their people and planet values in a more meaningful way for their growth, irrespective of fund managers' short term shift in priorities.

Some are advocating for an expansion to "ESHG" by adding "H" for "Health." This broader perspective aims to encourage businesses to prioritise public health as part of their corporate responsibility, just as they do with climate change. This to me seems like the promising next step towards honing in on what ESG set out to measure to in the first place.

Turning ESG into People, Planet, Profit

Another way to potentially reimagine ESG is to think of it as People, Planet, Profit. This perspective broadens the focus to encompass societal impact beyond just financial returns.?

In my opinion, this perspective would allow us to measure how businesses positively affect people, the planet, and their bottom line, more efficiently.?

ESG, viewed through the lens of People, Planet, Profit, also allows us to define what "good business" truly means.

It's not just about boosting investor returns; it's about creating a workplace where people are better looked after, fostering a healthier planet, and ensuring a sustainable long-term business model.

A Holistic Approach to ESG

ESG needs to be observed with a wider lens, considering the good businesses can do, and the impact they can have on a greener, more people-focused workplace.?

ESG is not just about returns; it's about creating a more responsible and sustainable business world. Again, as customers demand this of businesses, ultimately the ESG agenda will prevail in the investment community who will follow the money.

Tech-Enhanced ESG: The MyDay App Revolution

To me, one of the most exciting developments in the world of ESG is how technology is transforming its landscape.?

As the creator of the MyDay app , I cannot help but highlight our mission and product as a prime example of this transformation. Tech innovation, like our own, is demonstrating how ESG can extend far beyond the confines of the investment arena.

The MyDay app is more than just a wellness platform. It empowers users to build social support groups, prioritise their wellness through daily challenges, and create a greener workplace, as well as wider community through local impact projects.?

This fusion of social, environmental, and personal wellness into a single platform showcases the potential of technology to redefine ESG within and outside the workplace.

The Future of ESG: Don't throw the baby out with the bathwater

While there are valid criticisms of ESG, all challenges are helpful to hone and improve. What's more, any cynicism will likely only be short term as customers continue to hold companies and political parties to account for a greener, healthier agenda.

What we do know is that using ESG, the way it was initially envisioned, can allow leaders to really focus on creating good business based on clear ethics and values. Using a framework, whether its ESG, ESHG, People/Planet/Profit or anything else, can be an incredibly useful tool.?

ESG is evolving and adapting, and with the help of innovative technologies (like the MyDay app) it is expanding its horizons beyond the investment sphere. Although it’s difficult to say what the next phase of ESG will look like, I believe that companies who continue to implement ESG based values will continue to hire, retain staff and outperform in their markets whilst creating a more positive future for us all.?

Let's remember the broader picture and the potential for positive change that ESG represents.?

#ESG #Sustainability #TechInnovation #Wellness #MyDayApp