THRIVE: 08 Since the mid1980s, industries have been required to focus on various aspects of their businesses to implement corrective action and to fix mistakes that have been made in the past. STH Hospitality Lecturer, Erica São João unpacks the importance of Environmental Social Governance. ESG stands for Environmental Social Governance. This includes the three key focal points that are aimed at making the world a better place to work and live in. These concepts are constantly evolving, requiring companies to stay up to date, striving to perform better and committed to operating in the most ethical manner. Environmental activities encompass all actions which are within a business’ means to operate with a concern for the environment and the planet at the forefront of all decision making. Social refers to the way the business recruits, with considerations to diversity and inclusion (D&I) as well as fair labour practices. Is it similar to CSR (Corporate social responsibility)? No, it is slightly better because all business actions are interrelated. Investors want to see evidence that employees are valued within the business. Governance refers to the documentation of these environmental and social activities, but also to an understanding of who the clients and investors are. The company should be accountable in all its activities with traceable evidence to verify its integrity and authenticity. In the application of ESG, there needs to be clear consideration of your business' ecosystem so that you are aware of where the business is situated in terms of market, suppliers, employees, and legal constraints. Each business will exist in a different ecosystem simply because of the products (rawmaterials) that they use, the market that is available to them, and the legal requirements within which they need to operate. Corporates are often criticised that the various scorecards used, become a tickbox exercise, whereas they should be viewed as a ‘to-do’ list to improve the way they operate with ESG in mind. This will then result in positive changes going forward and accountability will result in companies implementing strategic change. Investors are using ESG to reconsider their investment opportunities so that theyareinvestingincompaniesthatmake a positive impact on the environment, as well as seeking out alternatives to reduce the negative effects. For example, the way the company recruits taking into consideration the wellbeing of their employees, factors such as fair treatment, as well as diversity and inclusion in their Human Resource activities. Through the ESG lens, potential employees will examine the happiness of present employees, the flexibility and ‘perks’ on offer, the wellbeing activities that are implemented by the company as well as employee turnover. The ultimate goal is to recruit and retain the best talent to improve business performance and sustainability. Governance includes how these actions (environmental and social) and legal activities are governed. Investors are looking at the long-term effects of these actions, noting visible commitments. Individuals and investors improved financial knowledge and the growing prominence of ESG, allows them to understand what makes better business sense. This improved awareness of ESG creates more loyal customers and improved profitability for those businesses making a concerted effort to implement ESG. Far beyond being considered as another management acronym, ESG is not going away as it is being driven by employees, customers, suppliers and investors, providing an opportunity for a better world and working environment for all. ESG is being used to transform businesses by encouraging ethical and sustainable practices, solidifying, and improving accountable approaches with positive change. Edited for the STH Thrive Magazine 2022 Is ESG just another management acronym? Individuals and investors improved financial knowledge and the growing prominence of ESG, allows them to understand what makes better business sense. S u s t a i n a b i l i t y edition. This article was first published in SA Chef Magazine, issue 29, 2022.
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