The corporate world is full of acronyms, almost like a hidden language only understood by the sufficiently initiated. At Inclusion, Inc. we’re thrilled that acronyms like “DEI” and “D&I” have become so widely understood and appreciated. It’s a sign that businesses are not only receptive to the concepts of diversity, equity, and inclusion, but also understand their impact on the bottom line.
Recently, a new acronym has gained traction in the corporate lexicon: ESGs.
A New Focus for Corporate Social Responsibility—and DEI
ESG stands for environmental, social, and governance. “Investors are increasingly applying these non-financial factors as part of their analysis process to identify material risks and growth opportunities,” according to the CFA Institute. ESG metrics aren’t required for financial reporting. However, a lot of companies are choosing to share this data and for good reason—issues related to ESG are increasingly important to consumers—and customers. According to the CFA Institute, many companies are including this data in their annual reports—or even creating separate standalone reports to highlight their results.
Other organizations are taking note, though. CFA says: “Numerous institutions, such as the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and the Task Force on Climate-related Financial Disclosures (TCFD) are working to form standards and define materiality to facilitate incorporation of these factors into the investment process.”
How does ESG relate to CSR? Quite well actually. As Forbes reports: “while CSR holds businesses accountable for their social commitments in a qualitative manner, ESG helps measure or quantify such social efforts.”
There’s also certainly alignment between ESG and DEI. We’d suggest that companies with a strong and measurably impactful focus on DEI will also have high performance in ESG.
Companies that get DEI right are likely to have an edge when it comes to ESG, and vice versa. ESG goals are extremely attractive to younger generations who want to feel like they – and the organizations they work for – are making a positive impact on the world they live in. Similarly, many social and environmental goals in particular often have a special place in the hearts and minds of traditionally underrepresented groups whose background may make them more aware of social and climate injustice, for example.
This means both that companies with a strong culture of diversity and inclusion may already have a workforce energized to take on ESG goals and that companies already active in the ESG space are likely to attract more diverse talent and keep them engaged.
ESG might sound like just another acronym or passing fad to some observers, but environmental, social, and governance goals are increasingly important to younger generations of workers. Companies that embrace ESG may find ESG initiatives dovetail nicely with ongoing D&I efforts.