‘ESG’ ‘Sustainability’ ‘Net-zero’ ‘socially responsible’ environment-friendly’ and ‘corporate governance’ – these words are something every corporate person hears no matter in what industry they work.
With almost all big corporations focused on ‘sustainable growth’ it has become a necessity for employees to know what the above terms mean and conversations with my friends from non-ESG backgrounds reveal that very few know about even the full form of ESG.
This series aims to impart basic knowledge about ESG that every corporate employee should know in the times we are living in, no matter their industry or their designation because sooner or later every decision will be made keeping sustainability in mind.
But why am I penning this series when there are various courses/certifications from renowned institutions available and why would you read it?
First of all, let me clarify upfront that this series in no way is intended to or should be considered as an alternative to courses/certifications available as they are more elaborate.
It is only supposed to introduce you to ESG and help you in decision-making of even considering buying courses or obtaining any certification. Since most courses/certifications are expensive, you would waste your hard-earned money if you think ESG is not for you after your purchase.
This is also supposed to be a career guide for people looking to make ESG their professional career but are confused about what it is like working in ESG.
About the author
Hello reader, this is Dhrushil Zaveri. I Graduated in 2019 with a commerce degree, I joined a real estate development firm as a data management associate. After working for 2 years, I decided to switch careers and chose ESG due to it being a hot topic and after realizing its importance. In 2021, I joined Morningstar Sustainalytics as an ESG Research Associate in 2021. It was a big learning curve for me since I was coming from a completely different industry. After 2.5 years of learning and growing, I joined MSCI Inc. as an Analyst in May 2024.
Like many of you, I had no idea about what ESG means before joining Morningstar Sustainalytics. I learned through my work and reading books and articles online. This was also when I started The Fineco Pill – a blog dedicated to explaining ESG concepts in simple language.
So, without further ado, let’s start!
Introduction and Meaning of ESG
For the longest time, the main goal of companies was clear and straightforward: to make as much profit as possible. Similarly, investors aimed to put their money where it would grow the fastest, focusing on financial returns. This traditional approach to business and investing was the norm, with little consideration for broader impacts.
However, we've seen a significant shift in mindset and priorities in recent years. The focus has expanded beyond simple profit-making to include a more responsible approach to how money is made. This new perspective emphasizes not just the financial outcome, but also how it's achieved. This is where Environmental, Social, and Governance (ESG) comes into play. ESG represents a holistic way of looking at companies, assessing them not just on their ability to generate profit, but on how they manage their environmental footprint, contribute positively to society, and govern themselves with integrity and transparency.
The concept of responsibility in the context of ESG means conducting business in a way that's sustainable for the planet, beneficial to people and communities, and conducted with honesty and fairness. For example, it involves companies taking steps to reduce their environmental impact, such as by minimizing waste or using renewable energy sources. It also means companies should look after their employees, making sure they're treated well, paid fairly, and work in safe conditions. Furthermore, companies should ensure they're good neighbors in their communities and beyond, contributing positively and not engaging in practices that could cause harm. In terms of governance, transparency and fairness are key. This means businesses should operate openly, with clear reporting on their activities and finances, and should make decisions that are fair and ethical, avoiding conflicts of interest and corruption.
This shift towards ESG isn't just about doing good for the sake of it. It's also a recognition that sustainable, responsible businesses are likely to be more successful and resilient in the long term. Investors are increasingly aware that companies that pay attention to environmental sustainability, social responsibility, and strong governance are better investments because they are prepared for the future, have a more solid foundation, and are less likely to face damaging scandals or legal issues.
The journey of Environmental, Social, and Governance (ESG) principles from a niche interest to a mainstream investment criterion is a fascinating story of evolving business ethics and investor values. But how exactly did this shift come about? What does it entail to scrutinize a company through the lens of ESG? More importantly, how does adopting an ESG framework affect a company's long-term prospects in terms of profitability and sustainability? Furthermore, the role of governments in fostering an ESG-friendly environment cannot be overlooked, nor can the hurdles that come with implementing such progressive measures. This comprehensive course on ESG aims to explore all these aspects, offering real-world examples to illustrate the impact and challenges of ESG in today's business environment.
In the next episode, we will understand the importance of ESG.
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