In today’s business landscape, sustainable profitability has become a crucial goal for companies. This has led to the growing prominence of Environmental, Social, and Governance (ESG) practices, which encompass various aspects of a business’s impact on the environment and society. ESG is not limited to large corporations; it has become an essential strategy for businesses of all sizes.
Ian Hong, an ESG partner at KPMG Singapore, a leading professional services firm, explains that ESG focuses on evaluating an organization’s sustainability and societal contributions. To understand ESG better, it can be broken down into three key components:
- Environmental: This aspect assesses a company’s approach to addressing issues such as waste and pollution, greenhouse gas emissions, deforestation, and climate change, among others.
- Social: The social aspect revolves around how a company manages employee relations and diversity, working conditions, impact on local communities, handling conflicts, and ensuring health and safety standards.
- Governance: Governance evaluates a company’s leadership, executive pay, internal controls, shareholder rights, and transparency.
Keith Woo, a professional in the Project and Export Finance team at an international bank focusing on Renewables and Infrastructure, emphasizes that stakeholders, including financial institutions, governments, and investors, are increasingly informed and concerned about environmental and social sustainability.
As awareness of global challenges like climate change and social inequality rises, the importance of ESG in business decision-making has naturally grown. Companies are recognizing the significance of adopting sustainable practices to meet stakeholder expectations and secure long-term success.
Both Ian Hong and Keith Woo foresee the continued growth and relevance of ESG in the coming years as businesses strive to strike a balance between profitability and a positive impact on the world around them. Embracing ESG principles is not only beneficial for the environment and society but can also drive financial performance, making it a win-win approach for companies and their stakeholders.