ESG is becoming the new economic engine, beyond compliance.
With 15+ years of hands-on experiences of ESG, I heard various comments on ESG from many friends with different backgrounds. Some say ESG is just common sense, some say ESG is only about branding or investors relationship, some say ESG is mainly to stay compliance, some say ESG is a measure of developed countries to constrain the developing countries, some even say ESG is a scam or useless idea.
I have to admit all these comments could be partially correct from their individual perspective, but not complete. ESG is such a huge topic covering almost all operational aspects of a company, as to nearly everyone has their own feelings of ESG from their limited perspective. As a technical professional with experiences in the corporate management, consulting and financial sector, I feel my responsibility to explain what ESG is from a larger picture and longer evolution history. No matter you are a policy maker, corporate manager, finance coordinator, external consultant or rating analyst, I think you must be equipped youself with a clear understanding of ESG’s definition.
In all textbooks, ESG is defined as the abbreviation of Environment, Social and Governance, covering all the topics including wastewater, air, noise, waste, human rights, health and safety, governance structure, etc. The definition is given from a risk-based approach or compliance-based approach, which is what ESG has done for the past centuries, fighting with human’s greediness. History starts with child labor and forced labor in the industrial operations and mining sites in 19th and 20th century, to the great smog of London in mid-19th century, up until most recently Deepwater Horizon and Tianjin Explosion in 2000s. All the ESG regulatory requirements are enforcing the market participants to follow the rules to protect humanity and the environment while pursuing the economic outcomes.
However, with the signing of the Kyoto Protocol and the Paris Agreement, decarbonization has become widely recognized as a core ESG topic that depends on global collaboration in the 21st century. As renewable energy costs have fallen and electric vehicles have become commercially viable, ESG has advanced beyond simply minimizing negative environmental impacts toward creating positive impact, mainly through carbon reduction. In the global context of decarbonization, ESG has now evolved into an economic engine. Massive offshore wind farms have been developed in the Taiwan Strait, and large-scale solar farms have been built in the deserts of Western China. EVs and charging infrastructure are developing rapidly globally, alongside autonomous driving technology. EV battery plants and upstream metal mines are also expanding. Transitioning away from directly burning fossil fuels is widely recognized as a way to substantially limit global warming, a view clearly reflected in global taxonomies for sustainable finance. Companies with clearer transition pathways and greener production methods are better positioned to access capital.
In conclusion, ESG is transitioning from merely compliance with regulatory compliance, towards creating more positive impacts in a cleaner and greener way.
留下评论