ESG, SDG, CSR… these acronyms are thrown around a lot in the sustainability community. What are they, how are they different, and why are they all important? Here’s a quick overview of what’s what.
ESG is the acronym for Environmental, Social, and Governance. ESG is often used as a term in the investment world and it describes a lens or framework through which businesses prioritize what is most important and report to stakeholders. They are an evaluation of a firm’s collective conscientiousness for social and environmental factors.
Under the ‘environment’ umbrella, a company’s GHG emissions, energy usage, and water usage may be reported. Other indicators often reported under the ‘environment’ umbrella include climate risk mitigation, waste management, and emergency preparedness.
Under the ‘social’ umbrella a company’s working conditions, employee benefits, and diversity may be reported. Other indicators often reported under the ‘social’ umbrella include CEO pay ratio, gender pay ratio, and any human rights violations.
Under the ‘governance’ umbrella a company’s incentivized pay, supplier code of conduct, and tax transparency may be reported. Other indicators often reported under the ‘governance’ umbrella include stakeholder engagement, data privacy, and disclosure practices.
Customers and investors increasingly are looking at a company’s ESG impact when making purchasing and investment decisions. According to Morningstar, “U.S. sustainable funds attracted record flows in 2020 of $51.1 billion from investors in mutual funds and exchange-traded funds (ETFs).” Additionally, Harvard Law projects growth of ESG-mandated assets in the United States to grow almost three times as fast as non-ESG-mandated assets by 2025.
Various means to define and rate (or score) ESG are available. NASDAQ and The World Economic Forum both offer reporting guidelines to define the term. Historically ESG scores or ratings have been subjective – often based on voluntary self-disclosure from a company and partial data. Ultimately, an ESG score or rating should include real-time analysis of publicly available data. That data is hard to come by. As such, an ESG score or rating provided by voluntary company self-disclosure is a step in the right direction, for now. It is important to note that standardization is in the works.
SDG is the acronym for Sustainable Development Goals. Sustainable Development Goals (SDGs) are a collection of seventeen interconnected goals organized and established by the United Nations designed to be a “blueprint to achieve a better and more sustainable future for all”. Originating in 2015, they are intended to be achieved by the year 2030. They are included in the UN Resolution 2030 Agenda.
Each of the seventeen goals outlines targets, events, actions, and publications that correspond to that particular goal. For example, goal 1 is to “End poverty in all forms everywhere.” There are seven targets, thirty-four events, thirty-one publications, and 840 actions associated with this goal.
One can further explore each goal to see detailed information with regards to targets for each goal and indicators used to track progress.
Overall there are seventeen goals with 169 associated targets and 232 associated indicators. Periodic reviews of the indicators take place. The most recent in 2020 at the 51st session of the United Nations Statistical Commission. They will be reviewed again in 2025.
Corporate sustainability reports (CSR) also known as corporate social responsibility (CSR) reports are an umbrella term, usually applied to annual reports published by companies reporting their impact on the world around us. CSR reports provide a way for companies to communicate with stakeholders. These reports allow companies to display their impact on the environment, philanthropic endeavors, and ethical and economic impacts. In some regions, a CSR report is mandatory. However there is no common set of standards for these reports. Similar to ESG and SDG, CSR reports are meant to inform the public while also creating a framework in which to examine a company holistically, far beyond financial disclosure, to work towards a better future.
ESG, SDG, and CSR acronyms have been floating around the sustainability world for years. There is a lot of information packed into these three letter abbreviations, all of which are important for sustainability professionals to understand. At Trayak we keep up with the latest on these topics and more. EcoImpact licensed in conjunction with our expert consulting services provides clients with a single, scalable platform to meet their sustainability goals, meet compliance, and report.
Trayak has been helping leading brands of all sizes make data-driven sustainability decisions for over 10 years. If you would like to learn more about our tools and services please contact us.