ESG can be catalyst for sustainable development and investments

Environmental, social and governance (ESG) standards cover a range of non-financial matters that drive value for people, organisations and society. When applied appropriately, these standards can help organisations within the private and public sectors take a holistic approach when assessing performance.

This approach considers value from the perspective of many stakeholders based on understanding the interconnectedness among them across society.

For example, profit-making organisations can balance their needs to return profits for their shareholders with the need to reduce the adverse effects of their operation on the environment and community at large. As we have observed in recent years, the physical risk of climate change affects us all and, therefore, has become an enormous challenge for organisations themselves.

In the public sector, a value-for-money analysis focused not just on output measures but on the outcomes based on the lives and livelihoods that are impacted by public programmes and investments provides a comprehensive picture of the longer-term impact of such programmes. Unsurprisingly, more and more organisations are incorporating ESG into their strategy and purpose.

In an environment where organisations face significant macro-economic and social challenges from unemployment, inequality, food shortages, extreme weather events and natural disasters such as rising temperatures and droughts, adopting ESG across society can deliver sustainable development and investments.

ESG and sustainability thinking should be front and centre to build a more prosperous society with shared prosperity. Building a sustainable future requires a society that embraces ESG in development and investment, resulting in longer-term planning and delivering value to a broader stakeholder group.

It is a perspective well in line with the Brundtland definition of sustainable development — development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

Governments worldwide have to grapple with unsustainable levels of debt, poor quality of life of their citizens and climate change, to name a few, which require long rather than short-term thinking to solve.

Awodumila is a Partner at Deloitte East Africa. He is an author who writes and speaks widely on corporate reporting topics.