What is ESG and how do you go about it?

The acronym 'ESG' came over from the investment world, when investors, banks and fund managers were looking for a way to make social risks measurable. 'Sustainability' was (and is) too vague a term, and ESG offered a data-driven approach to base investment decisions on. Mnemonic to remember for now: sustainability is a belief or ambition, and ESG is the yardstick you hang on to it.  

What is ESG?  

ESG is a framework that companies and investors use to assess an organisation's sustainability and social responsibility. ESG is not a dataset per se, but a way of approaching or thinking about an organisation's non-financial performance. Performance that, incidentally, does affect its long-term value, risks and reputation. 

When do you speak of ESG data? 

ESG data are standardised, structured datasets that organisations use to measure, monitor, report or benchmark their environmental, social and governance impacts.  

These data enable ESG aspects to be assessed in an objective, measurable and comparable way. They form the basis for ESG reports, sustainability analyses, risk assessments and strategic decision-making. 

This is the difference between ESG and ESG reporting  

ESG refers to the broad framework of themes around environment, social policy and good governance that you as an organisation engage with. Think about making choices, setting policies, formulating goals, and implementing actions.  

ESG reporting is the output: the process by which you systematically collect, analyse and report data on your performance on ESG themes. This can be done internally (for your own steering), or externally (for stakeholders, regulators or customers). With reporting requirements such as the CSRD, data on the three pillars of ESG is becoming increasingly important.  

This is what an ESG report says? 

The more insightful you make data on the impact of your business activities on non-financial factors, the more focused you can steer and report.  

Why is ESG important for companies and entrepreneurs? 

ESG helps you get a grip on your impact, risks and reputation. More and more clients, financiers and governments are demanding insight into your environmental, social and governance performance. Those who are prepared for this are simply in a stronger position. Think of tenders, investment rounds or chains that demand carbon data or a clear diversity policy. Moreover, ESG gives direction to internal improvement and innovation and, with transparency, you build trust with stakeholders. 

Why not everyone is a fan of the term ESG 

Not everyone is enthusiastic about how ESG is deployed today. Many organisations use ESG mainly to limit risks: prevent reputation damage, comply with rules, or avoid problems for shareholders. As a result, important issues like climate, human rights or fair working conditions are mainly seen as something to be controlled, not as an opportunity to really do better. Whereas: if we use ESG only to hedge risks, we miss the opportunity to make real progress.  

Doing more with ESG?

Below are three events you can participate in.