In the past participations I proposed to present some brief reports on the ESG of different manufacturers and brands in the industry, this with the idea of having better criteria when evaluating the brands and products that we are going to use in our designs, ensuring that these designs are sustainable and are part of our actions for our sustainability policy.

For this reason, I consider it pertinent that before we start, we are clear about what the acronym ESG refers to. The term ESG or environmental, social and governance, is widely used in the investment community. These are the metrics that are used today to measure the environmental and social impact of an organization. The term was first used in 2004 during the United Nations Global Compact, but has actually been around for much longer.

In the 1970s, socially responsible investing (SRI) emerged for investors to align their portfolios with their values. The movement gained momentum in the 1980s with divestment campaigns against companies doing business in South Africa during apartheid. Over time, SRI evolved to resemble today's corporate social responsibility, which focuses on social issues such as human rights and supply chain ethics.

It was not until the 1990s that companies changed their way of investing more for principles than just for economic benefits. "Gradually, institutional investors began to recognize that companies could improve their financial performance and risk management by focusing on ESG issues, such as greenhouse gas emissions. In response, asset managers began developing  ESG strategies and metrics to measure the environmental and social impact of their investments. In 1997, the Global Reporting Initiative (GRI) was founded with the aim of addressing environmental concerns, although it soon expanded its scope to focus on social and governance issues as well.

In 1998, John Elkington published, Cannibals with Forks, the Triple Bottom Line of 21st Century Business, in which he introduced the concept of the triple bottom line, a sustainability framework that revolves around the three P's: people, planet, and profit. Elkington's goal was to highlight a growing set of non-financial considerations that should be included when valuing companies. In addition, Elkington hoped to persuade companies to operate in the best interests of people and the planet; A desire that was shared by other people around the world." [1]

In 2000, the UN joined the world's top leaders at its headquarters in New York for the Millennium Summit. At this summit, the leaders established some guiding principles on issues such as human rights, working conditions, the environment and the fight against corruption. The summit resulted in the creation of the Millennium Development Goals (MDGs), which outline eight international development goals to be achieved by 2015. 

In that year, the Carbon Disclosure Project (CDP) was also founded. The CDP was the beginning for institutional investors to start asking companies to report on their climate impact.

"In 2004, the term "ESG" became official after its first appearance in a report titled "Who Cares Wins." The report illustrates how to integrate ESG factors into a company's operations, breaking down the concept into its three core components: environmental, social, and corporate governance." [1]

In 2015, as we have already mentioned, the Sustainable Development Goals (SDGs) were created to replace the MDGs. The SDGs established seventeen  sustainability goals and a global agenda for sustainable development with the hope of improving the quality of life and achieving a more sustainable future by 2030. With their adoption, the SDGs marked a change in the socio-political mentality; ESG was no longer a topic of conversation, but something that could (and should) be measured.

"Investors continued to demand climate-related financial information from companies, so regulators responded with new reporting requirements. The Task Force on Climate-related Financial Disclosures (TCFD) was founded in 2015 with the aim of providing standards for climate-related disclosures for financial institutions, as well as companies and investors.

Later in 2017, a group of 140 CEOs came together to sign the Compact for Responsible and Responsive Leadership (the Compact) that was drafted by the World Economic Forum. The signatories pledged to work together to help achieve the UN SDGs, a promise that will be put to the test in 2020.

When the COVID-19 pandemic hit, many investors feared that companies would give up on their ESG initiatives in the interest of staying afloat. And while this was the case in some instances, an interesting finding was made: companies that were strong ESG performers were better equipped to weather the pandemic, as they had already factored in the possibility of disruption." [1]

Today, ESG is no longer a fringe concept, but a familiar acronym for companies and investors alike. ESG data is used to evaluate a company's performance on specific issues. For example, carbon emissions per unit of revenue are used to assess a company's environmental impact.

Asset managers continue to develop a range of ESG metrics to measure the environmental and social impact of today's companies. These strategies focus on excluding industries or organizations that do not meet certain ESG criteria. Others focus on actively selecting companies that have strong ESG profiles.

On the other hand, new regulations have been established, such as the  European Union's Corporate Sustainability Reporting Directive (CSRD), which requires companies to report on the environmental and social impact of their business activities, and on the commercial impact of their ESG efforts. In North America, the Securities and Exchange Commission (SEC) is considering mandatory ESG reporting for public companies.

"ESG ratings and indices have also become more prevalent in recent years. Morgan Stanley Capital International (MSCI), for example, offers a range of ESG indices that allow investors to track companies based on their ESG performance. These indices have become popular with investors looking to integrate ESG factors into their portfolios." [1]

The world is facing increasing challenges related to climate change and the social issues that come with it, which is why ESG considerations will continue to play a critical role in how companies and investors operate and measure their performance.

The ESG reports or, where appropriate, the CSR (Corporate Social Responsibility) initiatives that companies present or publish on their websites can help us to know the policies and good practices that our partners carry out to call themselves Sustainable or responsible with the environment, it is up to us to evaluate and corroborate that they are based on objective metrics and that they are not "greenwashing".” I invite you to learn about them in the following interventions.

 Notes:

1. Tom Krantz (8 de febrero de 2024), The history of ESG: A journey towards sustainable investing.  https://www.ibm.com/think/topics/environmental-social-and-governance-history