Very often, you will see “sustainability” and “ESG” used one next to another in the same sentence. Other times, they may even be used interchangeably. However, very few people know that there is a difference between the two, the ESG vs sustainability, especially in terms of disclosing data.
ESG and sustainability both deal with the company data. But the purpose and the function of these data areas are entirely different. So when you are setting up a business or dealing with the company’s legal issues, you must know the differences between ESG vs sustainability.
If you plan to implement them in your company with the assistance of ESG strategy consulting firms, then you must be aware of the differences between the two. Find out where they overlap – and most importantly, why these minor technicalities should matter to you.
How Can You Define Sustainability? –
When talking about ESG vs sustainability, most of the time, we refer to it as “reducing our carbon footprint” or, in even simpler terms, “going green.” As a result, when we think about sustainability, our mind goes to practices such as reducing our water usage or limiting our consumption of energy.
While that’s true, it is not exactly complete. Sustainability is more or less an umbrella that usually covers a company’s efforts to reduce its impact throughout the world. For instance, aside from the usual actions, sustainability may also mean creating more jobs and promoting gender equality.
Still, since it is such a broad concept, companies frequently have trouble getting a true grasp of it. This is why so many have failed to integrate it fully. They have some vague ideas, but they can’t seem to measure anything – which is where ESG comes in.
What Do You Understand By The Term ESG?
ESG is the data-driven, more specific version of sustainability. Its focus is on three dimensions that gave it the name: Environmental, Social, and Governance. The term itself has become the preferred option, as it is more detailed and easier to approach.
To put it simply, ESG is a set of standards for the behavior of a company, applied by socially conscious investors. In other words, investors will use ESG to determine exactly how environmentally conscious a company is and whether it is worthy of a potential investment or not.
The criteria will look at how a company works to safeguard the environment – for instance, their corporate policy to address climate change.
It looks at how a company manages relationships between employees, operational communities, and other corporate policies to ensure a company is acting responsibly.
Reports are very required for understanding the ESG vs sustainability; the audits are often made in this regard so that company owners may address a potential problem.
ESG vs Sustainability Main Difference Outlined
As you can see, there are many differences between sustainability and ESG: while sustainability is rather vague, ESG is measurable and specific. Sustainability vs ESG can mean various things from one company to another, but the set of criteria for ESG always remains the same.
|ESG is all about the company stakeholders.||Sustainability is about the relationships between the company and the environment.|
|ESG is more like an investment framework||Company sustainability is a framework for making an internal capital investment.|
|In the ESG, sustainability is a single pillar. So you can say suitability also comes under the process of the ESG.||Sustainability is more like a subset of a more extensive set of ESG.|
|ESG is more applicable to more prominent companies. But the protocols of the ESG are also linked to the companies’ sustainability.||Sustainability is a step where the companies maintain the environment-friendly protocols strictly. For example, the companies are adopting the zero waste mechanism carbon-neutral features.|
|ESG looks at how the company is looking forward and how the companies share, and the other financial issues.||Sustainability is looking at how the company is impacting the environment.|
These are the key differences between the ESG vs sustainability. Apart from the functions, both of these two are pretty different with respect to the functional areas of ESG and sustainability.
The Bottom Line
The line between the ESG vs sustainability is fragile, making it understandable why so many companies mix them. However, if you want your company to be successful and attract investors, you need to be very careful how you use these concepts.
While ESG can be measured and reported, sustainability is not easy to measure. For this reason, ESG is considered to be more of an extension of sustainability. For larger companies, ESG is a necessity.
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