All the buzz on ESG; What is ESG?

ESG here, ESG there. There is so much hype around ESG. Why it is the talk of the corporate world? To know that, let us get to the basics. First of all, what is ESG?

ESG stands for Environmental, Social and Governance. These three factors help companies operate in a way that considers their impact on the environment, treats people fairly, and follows transparent business practices. Let’s take an example of a clothing company and how it might adopt ESG principles in its business operations and practices.

a)  ENVIRONMENT: The clothing company is conscious of the environment while running its business by using resources wisely, minimizing waste, and reducing pollution. For example, it might,

-> use fewer or no plastic bags;

-> choose eco-friendly fabrics;

-> ensure that dye used in making clothes is not dumped into rivers; and

-> reduce its carbon footprint by using energy-efficient lighting in the store.

b)  SOCIAL: This focuses on how the clothing company treats people like its employees and customers. For example, it ensures that

-> people who sew clothes are paid fairly;

-> employees work in safe places;

-> there are no excessive working hours, beyond the hours stipulated by the law.

c)   GOVERNANCE:  This refers to the rules, practices, and decisions the clothing company follows to ensure it is run responsibly and fairly. For an instance,

-> Accurately accounting for profits;

-> Ensuring fair pricing; and

-> Making sure that the business is transparent and trustworthy.

Why is ESG important for businesses? As seen with the clothing company example, ESG goes beyond being just a buzzword. Adopting ESG principles means being conscious of the business’s impact on the environment, building a supportive and fair workplace and ensuring transparency and trust in their business practices.

The growing momentum and focus on ESG in Malaysia shows that there is a shift in the corporate world towards more sustainable and responsible business practices. More customers, investors, and governments expect companies to act responsibly. Understanding and integrating ESG can significantly boost a company's reputation and ensure long-term success.

21 October 2024

WRITTEN BY LEENALOCHANA

Find Leenalochana at: www.linkedin.com/in/leena39/