MKI MANAGEMENT SERVICES

ESG stands for ENVIRONMENTAL , SOCIAL & GOVERNANCE.

In a simplified explanation, the words Environmental , Social & Governance are the three pillars of ESG and each pillar has its own scope of definitions and framework. 

From the days that people are driven by profit only , which is the final bottom line or standard bottom line ,  it has evolved to the triple bottom lines being  PROFIT , PEOPLE  &  PLANET. 

Businesses recognized that businesses and its continued success are not only driven by profit or money alone. 

So just by making money alone , the business cannot sustain itself.  

It means that the mere fact that the business makes money now , does not mean that it can continue to make money . 

Now this aspect of thoughts is what is called SUSTAINABILITY. 

It may be confusing to note how a business that is making money cannot continue or sustain itself.  

The focus or rather key is continuity and/or sustainability. 

If a business continues to make money , it can continue and can sustain but the concern is actually can the business continue to make money.

The irony is that if the business is only focused on making money , it will fail in continuing to make money.  

If that being the issue , making money alone does not sustain a business, than what can sustain a business is the actual concern.

It falls back to how a business can make money in the first place.

The business need be competitive and continuously develop plus adapt to changes; and what drives a business to success is the company's content , the blood line of the company , the people. 

The people are the driving force behind the company. 

If a company that makes money and focusses only on money , then it will start losing its people and by domino effect hence the company will ultimately stop to be able to make money.

"Take care of your employees before someone else does"

This is a classic saying best reflective of the the tone of the importance of people and why they leave and/or failed to be retained. 

A company taking care of its people , means managing its people.

From recruitment to training and developing them and compensating them.

As seen from this flow of thoughts , the bottom line has absorbed PEOPLE in addition to the earlier standard bottom line of just only PROFIT.

The first and second bottom line has clearly been defined as PROFIT and PEOPLE. 

The third bottom line revolves around the environment namely what eventually our activities affect the planet and thus the third bottom line being PLANET. 

The triple bottom line or 3Ps  have been applied and absorbed in further business strategies particularly in CSR, Corporate Social Responsibility that further recognised the environmental concerns as well as the social aspect. 

However CSR was too open ended. In an extreme scenario, a company cutting down thousands of trees can be announcing it is replanting trees (which merely constitutes 10% of what it cuts down), but truly in its public announcement that it is replanting trees and contributing back. The company is not wrong but the system is lacking in that perspective.

The CSR was merely describing responsibilities without quantifying it and this rendered it ineffective or rather reflecting its flaw, unquantifiable.

ESG next came in consolidating CSR with the 3 pillars of Environmental, Social and Governance.

More critically ESG has metrics and is quantifiable in the actions to be taken. 

It is based on the carbon platform where every action or inaction will cause carbon emission and everything is measured under carbon emission.

Thus carbon emission is the currency for ESG.

The CSR as was mentioned is flawed and the ESG has evolved to consolidate and rectify where CSR was flawed. 

The most fundamental difference between the CSR and ESG is that flaw as was mentioned. That flaw would be CSR's lack of quantification whilst ESG has such quantifications, metrics. 

The simplest way of differentiating CSR and ESG and the flaw in the absence of metrics is to apply CSR and ESG to the earlier scenario.

CSR demands replanting of trees if trees were chopped down. The company has replanted trees and announced it publicly. All is done. All is good.

Not really. 

CSR as was mentioned, does not have any set of values to assess what need be done or rather here, it does not state the number of trees to be replanted.