Sustainability, social responsibility, and ESG impact: Rethinking the approach in a rapidly changing world
Today’s world is continually reshaping itself, subjected to an unprecedented rate of change. We see evidence of this change everywhere we look—smartphones and smart TVs. Smart cities and smart grids. Responsive Web, Big Data, and the Internet of Things (IoT). These and many other examples represent an exponential advancement of technology impacting nearly every aspect of our lives.
One common thread running through it all is the reality that we have greater connectivity and access to information than ever before. This is a key driver in ongoing globalization as communication and interaction become quicker and easier. With improved communication comes transparency: the more information that we have available to us, the more we learn, know, and discuss.
The outcomes and consequences of this rate of change generate countless opportunities, but also present complex new challenges. In addition, they shine a brighter light on existing challenges we still struggle to resolve.
Faced with these challenges, operating companies, their shareholders and investors, partner organizations, and providers of capital must rethink how their activities impact environments, people, and governments. Further, they must employ new solutions to manage those impacts because these problems, ongoing and emerging, demand innovative approaches. Traditionally, these processes have fallen under the headings of corporate social responsibility (CSR) or sustainability, but they are, in fact, much broader.
ESG impact, referencing the environmental, social, and governance components of these challenges, reflects a more comprehensive way of thinking. In recent years, the term has become popular among investors because it is inclusive of more than just social elements. The ESG designation is important because it represents not only the critical factors themselves, but also how they interface and interact. To devise truly sustainable, responsible solutions, we must account for this interplay: Interplay between people and their environments. Between societies and systems of government. Between ecosystems and regulations. The list goes on.
Providing solutions to ESG challenges therefore requires a comprehensive, integrated approach that previous strategies may have missed. It requires the application of diverse disciplines and methods. Complex challenges demand complex skills and expertise.
The emergence and growth of ESG in investing, commercial operations, and elsewhere, is still a work in progress. Continuing to define, operationalize, and measure what ESG impact truly is will create sustainable benefits for all stakeholders.