Oftentimes, three-letter acronyms trend and become buzzwords. At other times, they act as catalysts by influencing the business environment in which an organization operates. Such acronyms include CSR (corporate social responsibility), GRC (governance, risk, and compliance), and the most recent one, ESG (environmental, social, and governance). These are important business concepts that drive investment considerations and organizations’ cybersecurity commitments to customers. A common factor amongst CSR, GRC, and ESG is the role of governance in steering an organization’s vision, mission, and operations. Governance provides a structure to improve decision making and utilization of resources to achieve objectives.  

Understanding ESG

Though ESG gained traction within the last 2 years and became a major investment consideration, it evolved from a 2004 initiative by the United Nations in cooperation with the International Finance Corporation (IFC) and the Swiss government to integrate environmental and social factors in corporate governance. The central idea of ESG as an investment framework is that by incorporating environmental and social policies in corporate decisions and processes, organizations are better positioned for a more sustainable and favorable market outcome. It is now mainstream for investors to assess environmental, social, and governance risks and opportunities in the selection of their investment portfolios. 

There are three main pillars in the ESG framework: environmental, social, and governance.

Environmental: This pillar tasks organizations to consider the effect of their products, services, and actions on the environment and encourages the implementation of policies and processes to reduce adverse impact. 

Social: This pillar focuses on an organization’s social responsibility to internal and external stakeholders, particularly its position on social issues such as diversity, equity, and inclusion, racial and gender justice, community involvement, and data protection. 

Governance: This pillar is the foundation of the ESG framework as it focuses on (Read more...)