The term ESG gained prominence in 2004, following an invitation from Kofi Annan, then the Secretary-General of the United Nations, to 18 prominent financial institutions from nine developed countries. These institutions collaborated to develop the ten principles of the Global Compact (GC) in the domains of human rights, labor, the environment, and anti-corruption.
Over the years, as the United Nations drafted its 17 Sustainable Development Goals by 2030, this model gained widespread adoption among major industries.
ESG serves as a comprehensive framework that assists stakeholders in comprehending how an organization manages risks and opportunities associated with environmental, social, and governance criteria. This approach provides a holistic view of various industrial and sustainability issues that transcend traditional environmental concerns. In this framework, stakeholders encompass not only the investment community but also customers, suppliers, and employees, all of whom are increasingly interested in the sustainability of their associated organizations’ operations.
Beyond conventional perspectives, ESG considers contemporary issues such as carbon reduction, combating climate change, and enhancing productivity and economic profitability.