ESG: what is it and why has it become important for companies?

There are only three letters, but they represent an increasingly important concept among Brazilian companies. In recent years, ESG has become an almost mandatory criterion for evaluating the performance of organizations in their fields of activity. 

After all, more than just considering the profitability of the business, the indicator analyzes the impact on the environment, social development and corporate governance. 

The Covid-19 pandemic scenario only highlighted this need to align corporate processes with the public interest. In short: it is not enough to make a profit, you need to create a positive environment in the region and in the community in which you operate.

If the company you run or work for doesn't yet know what it's about, it's best to run to avoid being overtaken by the competition. A survey conducted by the Chief Executives for Corporate Purpose (CECP) coalition shows that more than half of organizations believe that the topic will reach the highest hierarchical levels (such as CEOs and presidents) in the near future. 

Furthermore, seven out of ten companies around the world are already integrating evaluation criteria for these indicators into their processes and providing guidance to their professionals – and the tendency is for this number to rise even further in the coming months and years.

The expression ESG appeared in 2004 in the publication Who Cares Wins (“who cares wins”, in free translation), carried out by the World Bank in partnership with the United Nations (UN) Global Compact and financial institutions from nine countries. 

Each letter represents an important pillar of the proposal, forming the acronym in English: Environmental (environment), Social (social development) and Governance (governance). 

A company that absorbs these elements is able to develop more sustainable processes and trigger positive change, with markets aligned with social objectives and the reduction of inequality in the long term.

Seeking sustainable growth is not new for companies, especially those created recently. However, more than a beautiful marketing speech, the Covid-19 pandemic reinforced the need for these corporations to move from theory to practice. 

That is, developing effective actions that contribute to social development, the preservation of natural resources and respect for good practices that govern society. 

Corporations that care about these issues adapted more easily to the changes brought about by the new coronavirus and, above all, positioned themselves alongside people at a difficult time in history.

Evidently, it takes more than goodwill to include ESG in the company evaluation process. Two steps are fundamental in this regard. The first of these is understanding that the concept requires cultural adaptation, that is, it needs to be assimilated, understood and executed by all employees and be part of the company's mission and values. 

Second, it is essential to have the support of technology when seeking and implementing solutions that enable this transformation. From lighting fixtures to management systems, these tools also need to have a socio-environmental concern embedded in their development and execution. What's the point of worrying about environmental impact if internal processes use resources that harm the environment?

There is no longer room for companies that isolate themselves and do not care about the society in which they operate, as if what happens in their surroundings does not affect them. Today, it is known that the actions of each organization affect the region and the people close to it – for good and for bad. 

Therefore, this impact must be positive most of the time, allowing socioeconomic and environmental development that takes into account current demands, but also those of future generations. With ESG, corporations can finally be aware of this constantly changing scenario.