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From Buzzword to Imperative: How ESG is changing the business world

Updated: 1 day ago


how is esg transforming the future of business

As the global consciousness shifts towards sustainability and social responsibility, ESG has proven to be more than a mere ‘buzzword’; it's driving a paradigm shift in organisations, becoming the new lens through which companies are evaluated, investments are made, and long-term resilience is measured. 


But what exactly is ESG, and why does it matter? 


What is ESG?


ESG is a comprehensive framework used to evaluate a company's performance in three key areas:


  1. Environmental: This includes carbon emissions, energy efficiency, waste management, water conservation, and climate resilience. Companies adopting sustainable practices in these areas reduce their environmental footprint and contribute to a greener future.

  2. Social: Social considerations encompass labour practices, human rights, diversity and inclusion, employee well-being, community engagement, and supply chain ethics. Organisations that prioritise social responsibility foster inclusive cultures, build strong relationships with communities, and uphold human rights standards.

  3. Governance: Governance focuses on transparency, ethical leadership, board diversity, anti-corruption measures, risk management, and shareholder rights. Strong governance practices ensure accountability, integrity, and fairness in decision-making processes, enhancing trust among stakeholders.


Why should I care about ESG?  


Whether it be governments, investors, or consumers, all three stakeholders have transitioned from a passive stance to an active one, compelling companies to take a stand against climate change and social injustice.


In a world where consequences of corporate actions are felt far beyond boardrooms, investors are no longer content with merely tracking financial performance, they’re now scrutinising a company’s sustainable practices with laser focus, titling their portfolios towards companies that adopt ESG principles and rewarding them with access to capital and higher valuations. Consumers are also voting with their wallets, favouring brands that care about sustainability and social responsibility. Adding to the plate are the strict regulations implemented in Singapore, giving companies further reason to prioritise ESG Principles to safeguard against reputational risks and regulatory backlash.


Ultimately, companies that excel in ESG not only gain trust from socially conscious consumers and investors but also mitigate risks, enhance operational efficiency, and foster innovation, gaining competitive advantage in both local and global markets. Companies aren't just meeting ethical standards; they're positioning themselves for long-term success — It’s more than doing good, it’s about doing well. 


How is it impacting the business world?  


dbs sustainability report 2023

Source from DBS

Beyond our borders, we see numerous Asia companies rising as trailblazers in embedding ESG principles into their fundamental strategies and activities, establishing standards for industry excellence. For instance, DBS Bank has been recognized for its efforts in driving the transition to clean energy in Asia, financing major sustainable projects like large floating solar installations, and transforming its operations for energy efficiency while promoting a zero-food waste culture among employees. And it’s not alone. The Taiwan High-Speed Rail Corporation is also spearheading sustainability efforts through green initiatives like waste reduction, and energy-saving practices, and issuing green bonds to fund future sustainability projects


But the impact of ESG goes beyond individual companies—it's reshaping the entire business landscape. Closer to home, with grants and incentives introduced by the Singapore government to support ESG initiatives, companies now have the resources they need to maintain alignment with ESG metrics and transition towards low-carbon business models. This isn't just about compliance; it's about competitiveness. With its forward-thinking policies and supportive ecosystem, Singapore is cementing its position as a sustainability innovation hub and fostering a culture of innovation that will shape the future of business for years to come.


Final Thoughts


In this era of heightened social and environmental awareness, embracing ESG is not just a trend but a strategic imperative for businesses seeking long-term resilience, value creation, and positive impact. By integrating ESG principles into their DNA, companies can contribute to a more sustainable and equitable future while unlocking new opportunities for growth, innovation, and competitive advantage in the finance and professional development sectors. 


As ESG continues to evolve and gain prominence globally, local businesses that proactively embrace and embed ESG into their strategies will thrive in a changing world, creating shared value for stakeholders and society.


Want to stay ahead of the curve and expand your knowledge in ESG? Sign up for our SMU Academy Environmental, Social and Governance Mastery: Leading Sustainable Change in Business Course to learn more!

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