Corporate social responsibility (CSR) strategies have been around for decades. But in recent years, there has been an increasing focus on ESG—environmental, social, and corporate governance. How has this change evolved? What does it mean for how companies conduct business? And given the increasing pressure of tough climate change targets, what’s next for ESG? Two of ICF’s experts in this area, Ravi Kantamaneni and Kathleen Rafferty, recently explained what this new focus on ESG means for the future of CSR. With over 20 years of experience behind her, Kathleen is a Partner and the Corporate and Public Affairs Director for ICF Next, with expertise in corporate communications and public affairs. Ravi is ICF's Director of Energy and Climate and an ICF Climate Center Senior Fellow. He brings two decades of experience developing and implementing policies and programs that support the transition to a low carbon economy.
Describing the growth of ESG
Their piece covers the evolution of CSR and the growth of ESG. It looks at the differences between the two terms, but also considers how CSR has directly informed the creation of ESG. Ravi and Kathleen then highlight sustainable finance as one of the most important routes to financing the tough objectives of the EU 2050 emissions-neutrality goal and the U.S. Green Recovery plan. In addition, they show how corporations increasingly recognize that ESG issues affect business performance and build these considerations into their decision making.
Finally, Kathleen and Ravi also highlight the growing pressure from a different direction: regulation. Increasingly, regulators are underpinning the actions of organizations with tougher rules in this area. In the EU, we’re seeing more of a focus on four key ESG regulations integral to the EU Green Deal. These are:
- Taxonomy regulation (which prescribes sustainability definitions and requirements)
- Sustainability disclosure regulation
- Climate benchmarks regulation
- A proposed green bond standard
This focus on regulation complements other legislation that incorporates ESG obligations such as the Non-Financial Reporting Directive (NFRD).
Kathleen and Ravi argue that the key now is to bring together some of the many evolving frameworks into a more unified approach to ESG. Stakeholders want a clear and consistent view of how an organization is tackling these issues. Increasing coordination between the framework used to assess the use and consistency of ESG information is now essential. The recent creation of the Value Reporting Foundation and other agreements to develop a more comprehensive global corporate reporting system for sustainability disclosure are all steps in the right direction.
Sustainable growth and inclusive economic recovery are more important than ever
As we emerge from the COVID-19 pandemic, Kathleen and Ravi argue that we need sustainable growth and inclusive economic recovery—built on ESG-linked investment decisions—in order to hit the objectives of the Paris Agreement. The pressure is growing for more clarity and a more consistent and comparable definition of sustainable investment.
To help organizations to meet this challenge, companies will need greater regulatory clarity, the standardization of ESG frameworks, and increasing transparency and disclosure. For their part, businesses then need to understand, assess, and respond to evolving ESG-related risks and opportunities if they are to thrive.
You can read their full article here.
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