What is ESG and what can we do about it?

You may have heard the term ‘ESG’ used by large companies and management consultants. But ESG is not just relevant to big corporations. It is important for everyone, from government, industry and non-profit organisations to small businesses, households and individual citizens.

What does ESG stand for?

ESG is an acronym that represents three pillars of sustainability: ‘Environmental’, ‘Social’ and ‘Governance’. The term is often used interchangeably with concepts like sustainability and corporate social responsibility.

Here’s a summary of the three ESG pillars:

• Environmental: Impacts on the physical environment (e.g. climate change, natural resource depletion, waste, pollution, biodiversity loss and deforestation)
• Social: Impacts on people (e.g. the health, safety and life quality of workers, suppliers, customers, citizens and communities)
• Governance: The systems and processes controlling an organisation, group or household  (e.g. decision-making, values/ethics, compliance, risk management, reporting structure, accountability measures)

Across the three ESG pillars, organisations aim to reduce risks, create opportunities, and build value. To do this, they measure impacts, plan actions, and assess results. That’s the essence of the ESG approach.

ESG is a quantifiable, measurable way to create value that goes above and beyond financial performance.

This approach helps to embed sustainability into an organisation (or community) and demonstrate accountability for actions.

ESG principles apply to everyday life too

We all have an impact as individuals, households, and community members. Even in tough economic times, a household can look beyond everyday budget worries to create value by reducing negative ESG impacts or creating positive ones.

Put simply, what we do to our world’s natural resources, the environment and our communities has financial, strategic, reputational, climatic, and existential impacts.

ESG is an intelligent, ethical, common-sense approach that helps businesses stay profitable while positively impacting society and the planet. For households, ESG helps us think about the risks and environmental or social cost of our actions and grasp opportunities to be more sustainable.

It is simply ‘the right thing to do’ and can be applied relatively quickly if we choose to.

Why care about ESG?

ESG matters now because the call to action is increasingly urgent. Daily news articles tell us about social unrest, inequality, war, toxic spills, failing ecosystems, species going extinct, emergency weather events and economic instability.

We must stay informed but not become disheartened. If we live in a state of fear we may want to fight, freeze, or turn the other way. But if we adopt an optimistic mindset, we can focus on planning ahead. We can take timely, purposeful action within our means and sphere of influence. That’s where a simple framework like ESG can help.

How do we apply an ESG approach?

There are many targets, standards and frameworks setting out the what, when and how of ESG. These can be complex to navigate. Many groups are weighing in, including scientists, politicians, regulators, lawyers, accountants, journalists, activists, data analysts, consultants, boards and shareholders. So, it is not surprising there has been a sharp increase in products, services, training, certifications and dedicated in-house teams to plan, design, implement and maintain ESG.

Many businesses are incorporating ESG into their strategy, operational processes and supply chains. Meanwhile, more and more individuals are taking positive action at home, and considering ESG factors when making investments or buying goods and services.

A simple ESG template for business

Let’s start by looking at ESG in the context of a business. The table below shows how the three pillars typically apply to an organisation. If you own, manage or work in a business, reflect on how you could assess the risks and opportunities listed here, and what you might add or change.

Table 1. ESG for business

Click to view risks and opportunities for each of the three ESG pillars. These are just examples – you can download a copy of the table and adapt it to suit your organisation’s values and priorities.

Metrics and measurement

Consider appropriate metrics you could use to measure impact, cost and value. Some of the risks and opportunities can be measured through hard numeric data, such as bills, waste levels, productivity charts, staff turnover and market share. This sort of data is often reported via a company accounts dashboard or carbon accounting system.

Other ESG factors require softer measures. For instance, staff morale and corporate reputation could be tracked through surveys (e.g. SPART), while customer loyalty could be researched via a combination of sales history data and social media reviews..

ESG for everyday citizens and households

Your household is part of the environment and society, and has its own governance processes, even if you don’t call them that. Take a moment to think about how the three ESG pillars might apply to you and your household. What are the risks to you, your family and community? How could these be addressed? And if you took up such opportunities, what benefits might you see and how would you measure them?

After you’ve considered the above, click below to open a table summarising some possible ESG risks and opportunities for households. Better still, create your own table! Use it to stimulate discussion with your friends and family and start planning opportunities to reduce risks and implement opportunities. Start with small, achievable ways to improve things and work from there.

Table 2. ESG for households

Click to view risks and opportunities for each of the three ESG pillars. These are just examples – you can download a copy of the table and adapt it to suit your household’s values and priorities.

Make a difference!

Most of us want to have a go at being sustainable and to protect natural resources, climate health and society. The extent of our combined success in reducing risks and maximising opportunities requires us to continue to build critical mass locally, nationally and globally. Green Street is just one initiative doing a great job of making it easy for businesses and everyday households to play their part.

If you aren’t already, why not get involved and see if you can encourage other businesses, colleagues, friends and family to ‘get their ESG on’!

Article by Karen Warbrooke & Carolyn King

Further information

• The Paris Agreement on climate change 2015
• UN Sustainable Development Goals (SDGs)
• Climate Change Conference COP28
• Australian Government Climate Change Resources
• Global Reporting Initiative

Related Green Street resources

• 10 Steps to Sustainability
• Inspiration: Responsible Purchasing
• SPOT Sustainable Procurement Tool
• SPART stakeholder perception survey
• Environmental Management Systems