ESG - Good Sense for Everybody

Deep Ecology

During a recent conversation with an economist friend (micro, to be precise, the chap holds that microeconomics is a science, while macroeconomics is akin to astrology), I had mentioned that ESG was looming on the horizon.

“ESG! " he replied, "you mean ‘Extremely Slick Greenwashing’?”

Well, if anything, one might infer that a Ph. D in micro-economics enhances one’s skill in making thought-provoking comments. My friend claims to take a radical stance in ecology, one of his maîtres-penseurs is Arne Næss, although, I wonder whether the fact that he lives in a starchitect-designed minimalist compound and drives the largest full-electric SUV on the market is well aligned with 'Deep Ecology'. But I digress.

I quickly pointed out that 1) His remark neglected the “S” and the “G”, society and governance and 2) that, in my view, the EU directives on corporate responsibility in governance, social accountability and the environment would provide a powerful nudge in the direction of addressing serious contemporary issues in each of these areas.

My friend smirkingly agreed.

Charting the path forward

“Actually, you’re quite right”, he said. “We have to chart this path forward and business must lead the way. “And, he continued, there is no G without S and no S without E. And it won’t necessarily be an easy road.”

So, pragmatically speaking, what is the risk of not taking up the challenge? Well, if we take my friend’s sarcasm as a possible viewpoint among observers, a direct inherent risk to a company is reputation risk.

In an increasingly socially conscious world, ESG non-compliance, or just paying lip service to ESG principles could damage an organization’s image. Stakeholders also assess corporate behavior beyond financial performance.

Environmental violations, such as pollution or resource depletion, can lead to public outrage and tarnish a company's image as an environmentally responsible entity. Similarly, social issues like labor exploitation or discrimination can trigger boycotts, protests, and negative media coverage, eroding consumer trust and loyalty. Moreover, governance failures, such as unethical conduct or lack of transparency, undermine stakeholders' confidence in a company's integrity and leadership.

A strategic imperative for safeguarding reputation

The interconnectedness and velocity of social media amplify the impact of non-compliance, as news travels swiftly and reputational crises escalate rapidly. 

Beyond immediate financial repercussions, reputational harm can have long-lasting effects on a company's relationships with customers, investors, employees, and regulators, impairing its ability to attract talent, secure investments, and maintain market share. 

Hence, putting priority on ESG compliance isn't just a matter of ethical responsibility but also a strategic imperative for safeguarding reputation and sustaining long-term success in the marketplace.

My friend loaned me his copy of Deep Ecology and we thought perhaps we’d start talking about “GSE” for a change of pace. Because ESG makes “Good Sense for Everybody”.

Get it?

Audit ED

Image by freepik