Environmental, social and governance concerns creep up corporate and government agendas
Long-term profitability can only be found where sound environmental and social approaches meet with good governance, say experts
US Steel’s decision to hire Price Waterhouse to verify its 1902 accounts produced what is regarded as the first annual report of the modern era, a 40-page document intended to dispel public suspicions over the way the group’s assets were valued.
Although it would take more than three decades – and the many scandals laid bare by the calamitous 1929 stock market collapse – before the practice became a legal requirement in the US, the global trend since then has been one of ever deeper and broader levels of disclosure.
The dominant philosophy guiding today’s corporate reporting is built around the understanding that sustainable, long-term profitability will be found where sound environmental and social approaches meet with good governance. Dodging taxes, enslaving workers or destroying the environment will prove just as fatal to companies as red ink on the bottom line.
“It is no longer feasible nor profitable in the long run to measure the success of a company based only on short-term growth and margins,” says Jean-Marc Champagne, climate finance adviser for the global environmental group WWF-Hong Kong. “Growth with sustainability and regard for the planet are the only way forward – this is not just a moral issue, it’s a financial one.”
Public policy and corporate interests have not always seen eye to eye on sustainability, says Usman W. Chohan, an expert in policy reform at the University of New South Wales in Australia.
“In some countries corporate interests took the initiative, while in others it was public policy,” he says. “However, there is a greater convergence in interests as both sectors lay greater emphasis on the need for a green approach and a sustainability strategy.”
Regardless of whether it is companies or governments that are driving the change, environmental, social and governance (ESG) concerns have been creeping up the agenda for leaders of both, according to the World Economic Forum’s 2017 Global Risks Report. As recently as 2010, economic and geopolitical issues dominated the top concerns of business and political leaders surveyed, in terms of those events judged most likely to occur and those that respondents felt would do the most damage.
