Understanding the “G” in ESG: The critical role of compliance

11 minute read

Octavia Butler, a pioneering American writer, once wrote: “There is nothing new under the sun, but there are new suns.” Can this analogy also be applied to the concept of environmental, social, and governance (ESG)?

While ESG has gained significantly increased attention over the last years, it is not an entirely new concept—socially responsible business as a notion has been around for decades.

However, what is new is the growing emphasis on the importance of ESG factors not only in the public’s perception (e.g., consumers) but also in the shareholder’s investment decision-making process and the broader context of the stability of global financial systems. This renewed focus on ESG factors has led to a proliferation of ESG funds and investment products, as well as a growing awareness of the importance of connecting corporate values and missions with operational excellence, effective management of capital, and good governance.

While environmental and social factors often steal the spotlight, governance is equally important. A lack of proper attention to this area leads to myriad unaddressed risks, impacting not only the organization itself—including its talent—but also investors, customers, suppliers, and the broader business community.

Governance is a cornerstone of sustainable businesses, and hence this article further explores its importance in this context: the “G” in ESG (the terms ESG and sustainability are used interchangeably in this article).

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