“Recently, I was at a conference where someone said, ‘It's lovely that you are working on sustainability. It's the new buzzword of the future - carbon neutrality is the next wave after AI.’
That simple statement got me thinking, was sustainability really a new word? Was it the new fad after AI?”
Being sustainable today is almost considered the same as working on climate change, climate mitigation, carbon neutrality, etc.
Though these words have completely different meanings, somehow today in most conferences you see people using them synergistically. But that may be a nuance for multiple blogs.
Even though we all would like to believe that sustainability and ESG are the latest fads, they are not.
Sustainability is an ethos—a way of life, on the basis of which ESG, or Environment, Social, and Governance, is one framework that can be used to track sustainability efforts.
Let's demystify the same
Sustainability was first coined in 1987 in our common future report by the UN Brundtland Commission. In the report the most simple and popular definition of sustainability was propounded -
“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”
Taking from the AKEPA article on the history of sustainability, it's clear that from as old as 500 BC, we as humans have always known that our actions will have an impact on the environment. And that this impact risk would need to be mitigated for a better tomorrow.
In the end, sustainability is not new. The fact that there is a 900% surge in social media searches on sustainability just shows that today we are starting to realize its impact.
The government and agencies are starting to realize we can't contain the risk without concrete steps. This realization that not being sustainable is a risk, is new for countries and industries alike.
But that brings us to the next question: how is ESG and sustainability the same.
In our experience at Impactree.ai, working with over 80+ clients across MENA and Southeast Asia, we have learnt two things :
A) No sustainability is not the same as ESG.
ESG, or taking care of the environmental, social, and governance aspects of any business, industry, or government, is merely a framework to quantify the non-financial risks that any process faces.
ESG is a tool to measure the ethos of sustainability. It can give you concrete data and aid you in decision making.
But for being sustainable you will need to,
a) Identify the risks
b) Measure the risks
c) Track these risks
d) Build time bound strategies that compound growth on top of risks and not the other way round.
Today, governments across the world are ensuring companies track the ESG risks of their business, this is from the point of view that these non-financial metrics can determine the financial performance of companies. They have the power to ensure if there is a tomorrow or not for companies.
ESG is one of the many frameworks that can be used to ensure the sustainability of any process or organization. It allows people to turn a thought into something tangible. But is this enough to reverse the effect we have on the planet?
B) Only time will tell that - Behavioural change alone will not be enough
From the time of the BC era, we have always thought that if we do enough awareness and behavioral change, then we will appeal to the human consciousness. Clearly, taking from Leonardo DiCaprio's movie 'Don't Look Up', that will not happen.
What will always work - Economic value. We need to build economic value and risk into sustainability . The day companies can recognize the long-term growth potential in using ESG to ensure process, operational, and financial sustainability is when climate will be measured and focused on not as compliance, but as a competitive advantage.
In conclusion, for any organization, process and government to move forward in sustainability, we need to think of the same beyond behaviour change or compliance. While those are the initial steps and will help spread awareness, clearly what we have learned over the last thousand years of this discussion is that awareness has not resulted in adoption.
Hence, adding to the current approach and looking at economic incentivization for organizations to adopt better risk management practices through ESG frameworks is a long-term option. Organizations could track ESG data to ensure they are on top of their risks, and they could be recognized, awarded, or given subsidized and reduced interest rates for committing to their ESG goals.
It's through social and economic value that we can change. Environment and social are both two sides of the same coin.
Watch this space for more on how ESG data metrics can add value to your business.
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