ESG — What Is It and Why It Matters

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Environmental, Social and Governance Is A Guiding Principle That Is Being Adopted By Businesses & Government Alike To Navigate An Increasingly Complex World Facing Tech & Climate Challenges

By Paul Adler, Esq., SIOR

What is Environmental, Social and Corporate Governance?

Short for “environmental, social and governance,” ESG represents a more stakeholder-centric approach to doing business. ESG is becoming top of mind for business leaders, investors and stakeholders as essential for doing business in your local area.

paul adlerIncreasingly companies, especially larger companies are agreeing to conduct themselves ethically in those three areas, though eco-consciousness is equally a part of the small business and entrepreneurial realm.  Let me breakdown what exactly ESG categories are:

Environmental begins to focus on preservation of the natural world – addressing topics including climate change, carbon emission reduction, water pollution and scarcity, air pollution and greenhouse gas emissions.

Social begins to focus on the consideration of humans and interdependencies. Addressing consumers’ success is top of mind. Data and security issues are paramount.

Governance begins to focus on logistics and the “Defined Process for Running a Business or Organization” This takes into account who is on the Board of Directors and why; executive compensation, political contributions and lobbying. We live in world where there is great access to information and a strong demand for transparency.

Even in Rockland, the smallest geographical county in the State of New York, we are all affected by what plays out on the state, national, and world stages.  Climate change, droughts, extreme heat, food insecurity all have a huge cascading impact on everyone, in one way or another, and at the end of the day, they factor into how we live and make business decisions. We have collectively witnessed events like Hurricane Sandy and the COVID-19 pandemic — showing us that we are interconnected and interdependent.

Every company must do their part to help mitigate the effects of environmental damage occurring at rapid pace to the environment, even if it begins with small steps.

With tech advances moving forward at warp speed, data and privacy are major concerns to customers and consumers.  Companies must protect the data.

With corporate governance front and center on people’s minds, a basic philosophical commitment to best practices is required.  More controls, reporting and transparency are sorely need.

Our elected officials must start to do their part to incorporate ESG in their best practices so a proper partnership with business and organizations are aligned for smart and sustainable growth.

Our villages, towns, county and the State of New York itself must embrace a forward-thinking state-of-mind and consciousness towards ecology and energy efficiency.  There is a collective and pressing need to ramp up the latest advancements in recycling, energy efficiency, and green construction in both residential and commercial buildings.  The entire infrastructure needs attention and revamping – but there’s one more thing that makes all this possible: buy in. Taxpayers, residents, everyone needs to feel like a stakeholder. To make this happen, leaders must step forward, and lead. ESG is not just a feel-good shorthand used in boardrooms – it’s a concept that must become a community mission.

In short, we must all become citizens of the world.

Paul Adler is Chief Strategy Officer of Rand Commercial.