ESG in business or how to do well by doing good

So, you fancy acronyms. They make you look smart, trendy, interesting. Don’t feel ashamed, we love them too!

While some of them are necessary to make a conversation more fluent or even to reinvent a brand, some of them are just unbearable. Yes, we mean it.

However, the acronym that’s central to this article couldn’t be more meaningful and, let’s admit it, trendy. The days when ESG was a nice to have strategy are long gone. Indeed, ESG – Environmental, Social and Governance –is taking off in both the asset management and private equity industries. Investors are integrating their principles into their core processes, following technological, socio-demographic and energy trends that are reshuffling the social order and the investment landscape.

In a meeting some weeks ago, one of our directors mentioned the growing importance of ESG in the investment realm. Doubtful, the young advisor in front of her raised his hand and asked what ESG was. That small anecdote was the trigger to write this article. Sometimes certain acronyms become buzzwords and may lose their powerful meaning and intention. We don’t want ESG to follow that path!

During the days that came after, we asked one of the professionals who worked on putting together our annual review 2018 to tell us a real life story that could exemplify the importance of ESG. That isn’t the only action we undertook, though. We also reached out to the team working on sustainability issues to record a “What is” video about ESG.

Below you’ll find the final result. Tell us how much you like them!

When a light Pashmina feels heavy on your shoulders

It’s not that long ago that buying a hand printed scarf or an ethnic piece of jewellery with a “Made in India” tag, here in Europe, would give me a warm and fuzzy feeling, the kind you get when you know you’re close to home (if you haven’t guessed already, my roots happen to be in India). But things have since changed.

Don’t get me wrong. I still get all warm and fuzzy when I think of my homeland. It’s just that following some infamous incidents involving the textile industry and child labour back home (yes, pretty serious stuff!), the endearing clothing tags have suddenly become, well, itchy.

Now, every time I chance upon a Pashmina here, I tend to think twice and do my research before putting my hands on it. Because, and let’s be upfront here, if there’s illegal and inhumane labour involved in putting together a piece of clothing, even the lightest Pashmina can feel heavy on your shoulders.

Now, think you’re an investor and you want to put your money in the Pashmina weaving business, or even better, imagine you own the business and you have a choice to either employ cheap but illegal labour or hiring workers through proper channels which might cost you a little.

Sure, you’d tell me, “business needs to be profitable, it’s not just about doing good.” But what if I told you, “you can do good and do well in your business at the same time.”

Making sustainable choices while doing business might increase your cost upfront but in the long run, you’re more likely to make profit and build a better reputation. Don’t just take it from me, researchers at a certain Harvard Business School also concur on the fact that “firms with good performance on material sustainability issues significantly outperform firms with poor performance on these issues, suggesting that (such) investments are shareholder-value enhancing.”

If you need more convincing on why businesses today should consider certain factors to stay relevant, have a look at the video below.

Video: What’s ESG?

What is ESG and why should businesses care? from PwC Luxembourg on Vimeo.

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