Unpacking the ESG concept
ESG stands for Environmental, Social, and Corporate Governance. ESG refers to an analytical framework to help measure whether an organization is performing sustainably. It is a tool that analyzes companies and accesses their level in relation to others. It looks at a business without a balance sheet and considers its impact on the business, its stakeholders, and society as a whole. Furthermore, ESG also deals with how a company manages risks and opportunities in a changing market. It is a company’s ability to create and maintain lasting value.
In a research paper of the Center for Research on the Epidemiology of Disasters “2021 Disaster in Numbers”, it was stated that Emergency Event Database (EM- DAT) reported the world has 432 catastrophic events related to natural hazards for the year 2021. These natural disasters have impacted Micro, Small, and Medium Enterprises (MSME). This impact could be markets, logistics, premises, people, and finance (Metcalf et al 2010). Considering the rising of natural events and the COVID-19 situation, more companies are putting a lot of effort into their ESG measurement and practices.
ESG is not a new concept, it is a continuation of socially responsible investing that has become popular. ESG started decades ago.