Environmental, social, and governance (ESG) is a framework for evaluating the sustainability and ethical impact of a company’s operations. ESG factors include environmental impacts, social responsibility, and governance practices. Over the years, ESG has become increasingly important and has been receiving increased attention and recognition for its significant impact on public health and well-being.
There has also been a growing emphasis on corporate social responsibility. As a result, companies are increasingly striving to align their business practices with ESG considerations, acknowledging the importance of environmental, social, and governance issues in their decision-making processes. A critical aspect of ESG is employee wellbeing, an essential component of a sustainable and responsible business strategy.
The Importance of ESG
ESG has gained significant attention and recognition due to its impact on public health and well-being. The framework emphasizes the importance of employee well-being, which is an essential component of a sustainable and responsible business strategy. It also focuses on the impact of environmental factors such as air and water pollution and climate change, as well as social factors like inaccessibility to healthcare and education. Governance factors such as ethical business practices, robust risk management, and transparency contribute to public trust in companies and institutions, which positively impacts public health.
Proponents of ESG argue that it is essential for businesses to consider these factors because they can have a significant impact on a company’s long-term success. For example, a company that fails to address environmental concerns could face reputational damage, regulatory fines, and even legal action. Similarly, a company that mistreats its employees or ignores social issues could face negative publicity and a loss of customer trust. And a company with poor governance practices may struggle to attract and retain talent or secure financing.
Furthermore, studies have shown that companies that prioritize ESG tend to perform better financially. According to a report by Morgan Stanley, companies with higher ESG scores outperformed their peers by 2.7% per year from 2007 to 2019. Another study by Harvard Business Review found that companies with high ESG ratings had a lower cost of capital and were less likely to experience negative stock price reactions to negative news events.
Incorporating ESG factors into business decision-making helps companies identify and mitigate potential health risks, promote public health and well-being, and contribute to a more sustainable and responsible society. Companies that prioritize ESG performance can benefit from improved risk management and reputation. This also increases their prospects of inclusion in ESG portfolios, which can lead to better investment outcomes.
ESG: The Need of the Hour
Incorporating ESG factors into investment decision-making has become increasingly popular. ESG rating agencies use information from companies’ annual reports to assess their ESG performance, allowing investors to make informed decisions on how to design their ESG portfolios. In India, the top 1,000 listed firms are mandated to prepare an annual Business Responsibility and Sustainability Report (BRSR) by the Securities and Exchange Board of India (SEBI) since 2022. The BRSR report encourages companies to disclose their adoption of responsible business practices, providing ESG rating agencies with necessary information to assess ESG performance. According to a research report of CareEdge, ESG reporting by Indian corporates has improved by 160%.
Weaving employee well-being into the ESG framework of organizations involves incorporating measures to ensure that the workforce is healthy, engaged, and productive. This can be achieved through various initiatives, such as promoting work-life balance, providing employee assistance programs, offering wellness programs and health benefits, and providing a safe and supportive work environment.
Incorporating employee well-being into the ESG framework can help attract and retain talent, increase productivity and motivation, and enhance the company’s reputation and brand image. Companies that prioritize employee well-being are seen as responsible and caring, which can positively impact their bottom line.
ESG enabling the workforce to be healthy
Weaving in employee wellbeing as part of the ESG framework of organizations involves incorporating measures to ensure that the workforce is healthy, engaged, and productive. This can be achieved through various initiatives, such as promoting work-life balance, providing employee assistance programs, offering wellness programs and health benefits, and providing a safe and supportive work environment.
Incorporating employee wellbeing into the ESG framework can bring many benefits to organizations:
1. It can help attract and retain talent, as employees are more likely to be loyal to a company that values their wellbeing.
2. It can increase productivity and motivation, as healthy and happy employees are likelier to be engaged and productive.
3. It can enhance the company’s reputation and brand image, as companies prioritizing employee wellbeing are seen as responsible and caring.
ESG has been gaining traction in recent years, with most companies considering it a significant aspect. ESG is not just a “nice-to-have” or a necessary framework for businesses in the modern world? It’s clear that ESG is no longer just a buzzword or a passing trend. With the increasing urgency of climate change, social justice issues, and the need for responsible governance, ESG has become a fundamental framework for businesses to operate in the 21st century. Weaving in employee wellbeing as part of the ESG framework of organisations can bear benefits to both employees and companies.
By prioritizing ESG factors including employee wellbeing, companies can create a more sustainable and responsible business that is better equipped to meet the challenges of the future. ESG performance can benefit from improved risk management and reputation. ESG is not only a good-to-have but a need of the hour for companies. Companies that ignore ESG risk falling behind their peers, losing investor and customer trust, and failing to contribute to a more sustainable and equitable world. On the other hand, companies that prioritize ESG can reap significant financial benefits while also making a positive impact on society and the planet. Therefore, ESG is not just a “nice-to-have,” but a necessary framework for businesses in the modern world.
About the author: Kriti Pradhan is the Head Of Communications at Arogya World. All views/opinions expressed in the article are of the author.