ESG (Environmental, Social, and Governance) has become a key focus for stakeholders of all stripes, from corporations and employees to regulators and NGOs. The EY US CEO Survey confirms this growing trend, with 82% of US CEOs considering ESG a key driver of value for their businesses. This has led to increased efforts by professional service providers to aid their clients in grappling with ESG challenges and identifying growth opportunities. The 2022 Wolters Kluwer Future Ready Lawyer Survey reveals that 50% of law firms have established an ESG practice within the last three years.
As regulations around climate disclosure continue to tighten, and businesses face heightened scrutiny around social responsibility, the “E” and “S” components of ESG have been pushed to the forefront. The “G” – governance – has often been overlooked, despite being a crucial element of the ESG model. The Morningstar Sustainalytics survey of 500 CSR and sustainability professionals found that 46% of respondents ranked corporate governance as the least important part of their ESG efforts. However, new data suggests this attitude could be shifting, emphasizing the importance of well-structured governance in driving overall ESG value.
Beginning with EHS in the 1980s and evolving through corporate sustainability in the 1990s to CSR in the early 2000s, the ESG framework has a legacy of evaluating an organization’s operational performance in terms of its social and environmental impact. With the pendulum potentially swinging back towards the critical role of governance in ESG, corporations are afforded a holistic approach to balance their environmental and social responsibilities without neglecting the importance of structured governance. This may prove beneficial in achieving their overall sustainability goals.
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