ESG is one of those acronyms that has now become a resounding roar. When I first heard it, with all my former boyish enthusiasm bred on a diet of Commando comics and dreams of being a fighter pilot, I converted it to the universal phonetic alphabet. Having worked with clients on thinking through and conceptualising ESG programs, I now realise how even this expansion showcases the depth of what is sought to be achieved by the acronym.


So, what is ESG? At its most rudimentary level, ESG stands for Environmental, Social, and Governance. So a set of disclosures of environmental, social and governance data that participants in an ecosystem can use to identify opportunities and measure and reduce risks in an enterprise. Think of these as data points that are not naturally covered in a financial analysis or operational analysis of the kind that underpinned business decisions in times of yore.

From whence ESG?

ESG was an acronym coined in a report called "Who Cares Wins"1, under the auspices of the UN Global Compact, which was published in December 2004. The executive summary pithily starts with the following lines:

"This report is the result of a joint initiative of financial institutions which were invited by United Nations Secretary-General Kofi Annan to develop guidelines and recommendations on how to better integrate environmental, social and corporate governance issues in asset management, securities brokerage services and associated research functions."

UN Secretary-General Kofi Annan launched the Global Compact in 2000 as a corporate responsibility initiative. The 10 principles of the UN Global Compact were grouped under 4 heads as follow2:

Human Rights

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights within their sphere of influence; and

Principle 2: make sure that they are not complicit in human rights abuses.


Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

Principle 4: the elimination of all forms of forced and compulsory labour;

Principle 5: the effective abolition of child labour; and

Principle 6: eliminate discrimination in respect of employment and occupation.


Principle 7: Businesses should support a precautionary approach to environmental challenges;

Principle 8: undertake initiatives to promote greater environmental responsibility; and

Principle 9: encourage the development and diffusion of environmentally friendly technologies.


Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

The primary goal of the UN Global Compact was to implement universal principles in business. With the passage of time and the increasing awareness of the deleterious impact of progress on the environment on people and governance, these principles have evolved into a code that is being applied to enterprises today. ESG is what we now see as this formulation of the UN Global Compact.

Criteria for ESG

Enough has been written about the various criteria for ESG matrices, that a short summary of each aspect should suffice.

E - Environment

Environmental aspects of the ESG matrix deal with how an enterprise interacts with the natural environment. This aspect would essentially focus on resource use, extraction and depletion, pollution, waste, sustainability and impact on the climate.

It's relevant to note here that businesses are unique. Some enterprises have a more direct interaction with the environment (like oil and gas, mining, transportation, chemical industries etc.) whilst others have an indirect interaction by virtue of how they participate in the economy (like financial institutions). From merely accepting environmental impact as a consequence of commerce, the environmental aspect of the ESG matrix focuses on mitigating if not reversing this impact.

S - Social

Social aspects of the ESG matrix deal with the impact of an enterprise on labour, human rights, and the human aspects of society within its sphere of operations. This aspect would encompass not only the already heavily legislated aspects of workplace conditions and safety, health and benefits, but also diversity, inclusion, anti-discrimination, parity and equity, as well as contribution back to society (like corporate social responsibility programs and initiatives).

Employment law and health and benefits practices are only a part of this aspect. This is not merely decanting old wine into a shiny new carafe. This aspect seeks to put the more subjective elements of the human condition (i.e., learning, emotion, aspiration, morality, conflict to name a few) into the spotlight, alongside easier-to-measure objective financial metrics or more generic and objective parameters such as the environment.

G - Governance

Governance aspects of the ESG matrix deal with the process of making and enforcing decisions within an enterprise. This aspect would highlight transparency, accountability, and compliance in an enterprise. Of the three constituents, this is perhaps the most amorphous. Laws (like laws relating to companies, partnerships and trusts) prescribe rules with respect to making decisions (i.e., the requirement of voting, resolutions etc.). It's not only this aspect that 'Governance' seeks to cover.

Governance includes looking at behaviour that falls between the cracks of rules and regulations. It's about interaction with the environment and social aspects, avoiding and preventing illegal activity, identifying and avoiding conflicts of interest, using accurate, ethical and transparent accounting methods, accountability, and perhaps most pointedly about establishing trust in a fair and well-structured enterprise.

Thinking about it

With the benefit of hindsight, it's easy to pontificate on how all of the ESG matrices are as relevant and critical to an enterprise, as are the literal nuts and bolts of its commercial operations. However, environmental and social consideration particularly were often thought of as being incidental to commerce. No more. ESG matrices have evolved into more than a "tick-the-box" or "disclose some information" paradigm.

ESG programs are more than noble intentions, and grandiose plans and statements. ESG efforts are about critically looking at impact across these factors, creating viable plans to address these factors positively, and constantly measuring and monitoring plans and impacts. ESG solutions are not a one-size-fits-all and require investigating and understanding enterprise in depth, considering factors that were once only addressed peripherally before.

Developing, monitoring and maintaining an ESG matrix is about knowing the ecosystem in which an enterprise operates, defining the expectations of the enterprise and its stakeholders, deciding on the approach to and cost of ESG programs, and thereafter delineating principles that will enable an enterprise to achieve and maintain its goals (including both commercial outcomes and stated ESG objectives).

We're fond of saying that an ESG framework resides at the true intersection of commercial intent, financial wherewithal and regulation. It's not only the letter of plan, but the spirit of it as well.

So .. Echo Sierra Golf?

ESG, echoes in all corridors of commerce, and all hallways of enterprise. It's a mountain range of connected peaks and valleys, an eco-system that needs to be both protected and nurtured. It's an endeavour, much like a game where the only competition is yourself, where the rules are defined but the odd mulligan is allowed, where holes-in-one are rare and not definitive signals of a win, and where no two shots are the same. The win at each course always energises one to get onto the next course and play one's best all over again.

Perhaps I did force fit the end to match the beginning in some ham-handed stretch, but the fact remains each enterprise and organization will have to find and play its own ESG narrative.


1. (last accessed March 15, 2023 at 15:26 IST)

2. Ibid footnote 2.

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