ESG: What’s right and What’s in Highlight

In today’s world, the cover is more important than the contents of the book. That is, everything should look good, no matter what’s inside. That’s what is here in this blog. I will start with ESG, which stands for Environmental, Social, and Governance. But one may interject that it may stand for “Everything Should Look Good”. Either way, the “E” in ESG stands for environmental, which covers topics such as environmental policies, energy use, emissions, pollution, resource use, and the like. The “E” of ESG tells the environmental story of the company; that is, how it works for (or against) the environment.

The next in line is “S”, which is social and governs topics that showcase the business’s relation with its external and internal stakeholders. This includes diversity and inclusion, gender and equality, discrimination, community development, and also favouritism.

Third in the queue is “G”, which is governance. It is a very important aspect of the internal governance of the business which focuses on the people of the company. It includes diversity in the workforce, leadership, and equality. This topic is a delicate one as the company can have a lot of Bharats and Vibhishans; people who are dedicated so much that they are willing to burn their midnight oils and on the same time people who if teased a little may squeeze out oil from the company.

ESG these days is gaining a lot of popularity as it highlights the non-financial performance of the company which by and large refers to the performance of the company which is not directly linked with its profits. It’s moving towards the people who are interested in ESG- The ESG investors who look at the non-financial performance of the company in order to assess its sustainability.

How do they do it? By looking into the reports presented by the company as of course one cannot individually check all these metrics. But this brings up the question that can’t these companies highlight only a few specifics and ignore various others or maybe show more than what they do non-financially? The technical jargon for this is greenwashing; again, which is a tactic of companies to create a perception of sustainability without any substantial changes.

There is a huge dump of such cases where companies are caught highlighting facts which are not completely true and at times even false that keep the true picture in dark. There are big companies showing off on big billboards that they are green and sustainable but the reality is different from what’s in highlights. To quote a few examples: Shell energy which has rebranded itself as a green company is actually the fourth largest polluter in the world. Coca Cola, a company responsible for many forms of ESG issues including plastic waste, water pollution, ground water reduction around production sites. Apple, favourite of many but less known that its claim for reducing plastic usage by removing the charger from the box actually adds to more plastic waste and resource use when it comes to buying it separately which comes in a separate box with much more waste along. Adidas claims they are working on waste reduction by making sportswear out of recycled polyester but this isn’t really sustainable because polyester can’t be recycled any further; yes that means dumps of waste.

Unilever, an FMCG giant committed to making efforts in collecting and processing plastics more than it sells by 2025 but an investigation by Global Alliance for Incinerator Alternatives (GAIA) pointed towards their controversial method of chemical recycling which resulted into stopping Unilever’s recycling methods in Indonesia.

This brings us to the conclusion that ESG, which in itself is a sustainable framework, but its implementation, measurement and interpretation can cause a lot of fingers to raise. And therefore, it is just to understand what’s right and what’s just in highlight to understand the true picture.

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