Environmental Social Governance (ESG)

The impact of climate change and resource scarcity, accelerating urbanisation, increased population, changing demography and inequality, technological breakthroughs, and other megatrends are causing unprecedented disruption locally and globally.

There is an increased need for business leaders to embed sustainability into their operations, as financial factors are no longer deemed the primary drivers of value. Governments are increasingly aligning long-term national priorities, including the stabilisation of the macroeconomic environment, achieving agriculture and food security, ensuring energy sufficiency (power and petroleum products), with sustainability and a regulatory drive for ESG practice.

The global shift in the last two decades has revealed the importance of ESG factors in value creation and business resilience. Shareholders and other stakeholders are becoming more concerned about the consideration of environmental, social, and governance (ESG) factors in business operations and risk management.

 

What Environmental Social Governance (ESG) entails

ESG is a balanced scorecard for assessing non-financial implications and impacts as well as risks and opportunities.

  • Environmental criteria examine the performance of an organisation in terms of stewardship towards the protection of the natural environment. The factors could include emission reduction, climate change, waste management, biodiversity impact, water stewardship, circular economy, etc.
  • Social criteria evaluates relationships with people - employees, host communities, and other stakeholders - for running an ethical business. Social factors include labour practices, human rights, gender diversity, community relations, etc.
  • Governance criteria involve leadership oversight and direction, board diversity, executive pay, audits, shareholders' rights, intellectual property protection, etc.

Today, the emphasis on ESG is growing steadily as stakeholders across the business spectrum now see ESG as a window into a company’s future. Investors are factoring ESG criteria into their decision-making and rating/ranking agencies are assessing businesses using their ESG performance.

 

Trends and key challenges our clients are now facing

As ESG data and information are growing in disclosure and awareness, many organisations are getting lost in the wave of trends in ESG. Some of the common challenges organisations face today include:

  • Stakeholder need and materiality: Stakeholders are requesting more information on ESG oversight and performance. But many clients are still struggling with understanding, identifying, and communicating the priority ESG topics that are relevant to their businesses and important to their stakeholders.
  • ESG maturity: Many organisations are still at the pragmatic stage of ESG growth, after long years of adopting sustainability practices. They are unable to scale up in their ESG maturity journey with time.
  • Embedding ESG in operations: For others, embedding ESG into risk management and strategy has been their concern. These organisations have their ESG activities independently and have not connected them for improving risk management and identifying insights for competitive advantage.
  • Data Quality and authenticity: In communicating sustainability performance, there is a scarcity of quality and authentic data. Many clients do not measure and monitor their ESG performance in a consistent manner, making it difficult to improve their performance.
  • Leadership and accountability: ESG leadership and accountability have been another challenge of business leaders. Many organisations do not have a senior management officer responsible for ESG implementation and reporting to the Board.
  • Building stakeholder trust and improving corporate brand: As customers, suppliers, shareholders, employees, regulators, and other third parties are making decisions using available information, most of them are concerned about the credibility of the available data for their use.

 

Ready to take the next step on your ESG journey?

At PwC, our purpose is to build trust in society and solve important problems. Our Sustainability/ Environmental, Social, and Governance (ESG) team leverages broad industry knowledge and experience as well as the empirical capability of our people to address clients' needs and deliver sustainable value.

We aim to help clients understand and execute on the options available to transform their organisation from strategy through execution to ensure relevance and profitability in a world undergoing dramatic transition.

 

We support clients in taking proactive steps to address

Climate change

Climate Change pose three risks to business continuity - transition risk, physical risk and liability risk. Inaction is not an option for any business at this time.

Learn more about Climate change.

Follow us