From the beginning, I have been a huge fan of the whole ESG concept. While it was originally established to set criteria for a company’s behavior for socially conscious investors to evaluate potential investments, post-COVID, the concept continues to expand. In time, I anticipate a range of changes, including: more regulation, more standardization, and more investor and consumer scrutiny. I see this as a good thing. It will help the world to understand the significant, positive role that business can and should play in helping to address the important issues of our time. But despite this positive trend, I feel there is still more that needs to be done.

In a previous blog post, I mentioned that a podcast interviewer asked me the following question – “If you were to add an additional letter to ESG, what would it be?”  Without hesitation, I replied “P” for partnership. I said this because I feel that the one issue I have with ESG, is that it is very company-centric.  It evaluates individual organizations without placing emphasis on what they do in collaboration with others.  While some of the ESG indicators focus on an organization’s participation in multi-stakeholder efforts, they do not appear to play a prominent role in the ESG framework. I would argue that endorsement and participation in sector-wide efforts is important enough to receive separate attention.

Photo by Redd on Unsplash

What if there was another category that evaluated the collective actions of companies coming together as a community, not as individual units.  What if a company’s collaboration within a process that unified corporate activities was established to incentivize more collective action?  When the right combination of corporate action comes together, 1 + 1 = 11, not 2.  The synergistic impact of a unified, sector-wide approach would help to increase the impact on environmental, social and governance investments. We don’t just want companies to do right by these sectors, we want them to also be an active part of the solution. This would serve to significantly increase our ability to help address the big topics – global warming, poverty, education deficiencies, hunger, and more.

Collective actions among prominent stakeholders such is governments, the United Nations, academic institutions and civil society has been a hallmark for addressing the sustainability development goals (SDGs). The SDGs are a collection of 17 interlinked global goals designed to be a “blueprint to achieve a better and more sustainable future for all”. The SDGs were set up in 2015 by the United Nations General Assembly and are intended to be achieved by 2030.

The ESG framework has the potential to play the same role for the corporate sector.  But for this to happen, corporates have to not only address their own indicators as a company, but also to work as a community to bring about change. This would give life to the “P” in ESG-P to help address crucial issues like climate change, carbon emissions, air and water pollution, human rights, data protection and privacy, and company governance structures.

If this concept was taken one step further, direct connections between the SDGs and ESG could be established to reflect the positive contribution that the business world plays in addressing global issues.  This would be a win-win for the world.

With this in mind, it is important for the ESG concept be flexible and open to revisions.  This would help to offer increased, real-time impact in our collective desire to improve our world.

Author – Matthew Friedman