The Difference Between ESG and Sustainability, and Why It Matters
Many people use ESG and Sustainability interchangeably. The meanings are similar, but distinct. Ensuring common understanding within your organization will help align people and resources to common goals, and make communications easier.
What is Sustainability?
Sustainability is a complex idea that encompasses all of a company’s efforts to minimize its negative impact on the world. The concept is often associated with the “triple bottom line” (people, planet, profit), and governance is not necessarily included. Sometimes it is equated with environmental and climate issues alone. It has been referred to as an “inside-out” view. But because the definition is broad and often used generally, some find it is tough to get alignment on measurable goals and accountabilities. For many organizations, defining sustainability for internal and external audiences helps to position priorities, align on appropriate reporting frameworks and guide their overall journey toward sustainable practices. This clear understanding supports telling a consistent, aligned sustainability story in stakeholder communications.
What is ESG?
ESG—Environment, Social, Governance—is a data-driven and investor-focused framework. The three dimensions are distinct and have measurable aspects tied to independent raters and rankers. There is a heavy emphasis on managing risk, reputation, operations and capital across these dimensions. Sometimes it’s referred to as an “outside-in” approach. Reporting is a central feature, since the financial impacts on the business are front and center. ESG investing has experienced a meteoric rise, and companies everywhere are embracing these concepts as value creators. (McKinsey) For public companies, telling a credible ESG story is a must-have and, at a minimum, issuing an annual report on progress is expected.
Whether you embrace Sustainability or ESG as the organizing principle, it’s important to establish shared understanding within your organization and with external audiences. This clarity has positive implications; helping to establish what is important to the company and to your external stakeholders, so you know what to measure, support and communicate. Consistency in your communications reinforces all the efforts the company is making, and increases understanding.
Importantly, such efforts are beginning to have an impact. And the profile of Corporate Sustainability and ESG is rising fast, and also coming under a microscope. Expect much more discussion on this topic. Some follow-up here.
How Ideas On Purpose Can Help
For over 20 years, IOP has been helping companies of all sizes with purpose-driven communications, including corporate reporting, and ESG and Sustainability storytelling. Our strategy, content, digital and creative teams are ready to help you define and tell your ESG/Sustainability story and meet your reporting goals. Feel free to email us, we’re happy to discuss the possibilities.