The Impact of ESG on Company Value

Pablo H. Plá, CEO San Miguel

Published on August 16, 2024, in Infobae

Environmental, social, and governance (ESG) criteria are gaining significant traction as they offer specific sustainability ratings that corporate social responsibility (CSR) did not provide.

We have transitioned from Corporate Social Responsibility (CSR) to the more encompassing Corporate Social Responsibility (CSR), which applies to all types of organizations, regardless of their size, activity, or sector.

Sustainable development in organizations has undergone significant evolution over the years. In this context, the growing interest in environmental protection has led companies to implement measurable strategies to remain competitive and even secure financing.

Initially, sustainable development focused primarily on the conservation and protection of the ecosystem. However, over time, this focus has expanded to incorporate social and economic aspects.

When the American economist Howard R. Bowen introduced the concept of CSR in 1953, he brought an ethical vision to business by also involving companies' commitment to contributing to the improvement of the quality of life of the local community in which they operate, meaning their customers, suppliers, and employees.

Sustainable development was initially centered on ecosystem conservation and protection, but over time, this focus has broadened to include social and economic aspects.

The terms have evolved. We have moved from Corporate Social Responsibility (CSR) to the more comprehensive Corporate Social Responsibility (CSR), which applies to all types of organizations, regardless of their size, activity, or sector.

At the same time, terms like sustainability and sustainability have been introduced, which, although similar, are not the same.

Sustainable development, centered on the rational use of natural resources, refers to the process that seeks to achieve a balance between their exploitation and the environment, avoiding altering conservation and the state in which they are found, protecting natural systems, and the quality of life of people. The implementation of clean energy and technologies, as well as the reuse and recycling of objects and materials, are closely related to this concept.

On the other hand, sustainable development – as outlined in the 17 Sustainable Development Goals (SDGs) of the UN's 2030 Agenda – aims to eradicate poverty, protect the planet, and ensure prosperity for all through socio-economic progress, considering the changes that societies undergo.

Measurable Indicators

To respond to the demand for integrating society into the investment strategy, the need to incorporate measurable indicators and ratios as part of entities' public information emerges.

This is how ESG criteria began to gain momentum, as they provide specific classifications in business sustainability that CSR did not offer. Both sustainability approaches prioritize concern for the environment and the society in which companies operate. An organization can implement both by considering them complementary, as they assist in managing the organization's impact on its community.

Companies that adopt a responsible approach and generate a positive impact on their surroundings are more likely to build a solid reputation, attract committed investors, and generate sustainable financial results in the long term.