I can understand why Environment would be part of the criteria of Sustainability since it concerns itself with judging if operations or practices can be done over long periods of time without compromising the next generation. But how do social and governance fit into this thinking?
In: 6
They are included for two very different, but related, reasons. The answer for “why social” is in the word sustainability. Asking if an activity or process is “sustainable” is at its most simple asking if the way we are doing it now can be continued, indefinitely, without causing more harm then good to human beings. “Can we keep doing things the way we are doing them now?”
So under that lens, of course social is included – sustainability is about human beings. ESG is trying the save the planet for humans sake – we don’t have another option as a back up. The better question is why include the environment? Remember, the earth doesn’t need us. If all humans disappeared tomorrow, the earth, and life , would do just fine without us. We aren’t trying to save the planet. We are trying to save ourselves, or more specifically the society and communities that we have built and would prefer to keep. Sustainability cares about the environment because we NEED a healthy environment to ensure we can survive and thrive ! If we don’t have a healthy environment (clean air, clean water, healthy soil , biodiversity, etc) then we can’t meet our core needs like food, water, and safety. If we can’t meet our needs, then obviously, we won’t be able to keep a healthy and functioning society. So, yes, as our environment degrades people already closest to the edge, who already struggle to meet their needs – they will feel the pain first. Those with more advantages can avoid the pain, but only for so long.
And that is where governance comes in. If environmental and social answer the “what” we are trying to save/improve , governance is the “how “ . Or more precisely, “ how do we know we are improving”. Here is an analogy.
Let’s say you have a giant tub of water. 10,000 gallons. And you find out there is a leak. So you put a 1 gallon bucket under that leak, and every 24 hours that bucket fills up. So you dump it back in the tub. At the end of the year you say “I have saved 365 gallons of water”. No, you didn’t. You saved 1 gallon of water. The same gallon, every day. That may sound silly, but there are a lot of environmental and social program out there that have great intentions – but in the end they don’t make a difference because they keep saving the same thing. They dont cut greenhouse gases, they just save the same greenhouse gases they saved last year. They “reclaim” the same stretch of beach every year. They plant a forest of trees, let them die, then go and plant them again. Maybe a bit of an exaggeration to make a point – A good governance model would help you see that plugging the hole is better then using the bucket. Governance is about not only measuring accurately that the stuff you do matters, but also that it is transparent to the people/groups it needs to be transparent to, and can be trusted – and who on the end is responsible if things go wrong So governance is always included in ESG so people looking from the outside can better judge not only if the work is worthy of focus, but also if progress seen can be trusted (or is just puffed up numbers) .
Tl:dr Social is part of ESG because sustainability is about saving the planet FOR human beings . So if we don’t save society, what are we saving? Governance is included because we need to know if what we are doing is working.
Latest Answers