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The rise of conscious consumerism paired which the shocking effects of the pandemic have made global leaders realize that ignoring the climate threat is no longer an option. With growing climate concerns, consumers are increasingly preferring the brands that are adopting the Environmental, Social and Governance measures.

ESG has also shifted the way investors, policymakers and shareholders analyse a company’s chances of surviving in the long term and safeguarding it from an unforeseen future.

What is ESG

ESG is the disclosure of data that tracks a company’s strategies and actions towards three-factor: Environmental, Social and Governance.

Environmental in ESG measure

As the name suggests, environmental (E) assesses the impact of a company’s operations on the environment, activities to reduce carbon emission and its strategies to manage environmental risk. Some examples of environmental factors are natural resource management, carbon emission reduction, and conscious sourcing of raw materials.

Social in ESG measure

Social criteria examine how a company builds its relations with employees, shareholders, investors, customers and dealers. Customer relations, employee health & safety, etc, are included in this social factor.

Governance in ESG measure

Building trust with customers, investors and shareholders is a company’s ultimate goal. The governance factor ensures transparency through audits, internal controls, equal pay, shareholder’s rights etc.

Here’s why ESG is important for businesses

1. Attracts long term investors

Investors who keep ESG points into consideration are not just concerned by the profits of the next quarter but by a company’s long term vision and contribution to the planet. These investors tend to stay to build a company’s value in long term.

As the popularity of ESG is growing, investors are searching for companies with a vision that aligns with the betterment of the planet. Research from Gartner.com states that almost 85% of investors in the US considered ESG factors before investing in 2020.

2. Clear communication with stakeholders

Through ESG, companies can develop channels to communicate efficiently with stakeholders. Activities like company audits, corruption checks and upholding transparency maintain stakeholders’ trust and build stronger relations.

3. Attract best talent

Employees are one of the most important factors that lead to a business’s success and stability. The new-age employees, also known as the millennials, are environmentally conscious and will refuse to work with companies without a strong CSR policy, as per Forbes.

Therefore, companies with a strong ESG base will attract employees who are compassionate and are not only associated with the company for profits but to build a better world.

4. Gives a competitive edge

Companies adapting to the changing socio-economic policies are likely to stay in the competition for longer. For example, companies like Starbucks and Nestle have pledged to be carbon neutral. In addition, these companies have made their packaging more environmentally friendly and are increasingly spending more on CSR activities.

With the after-effects of the pandemic, air & water pollution and the rising threat of global warming, consumers are more mindful of their actions and choose to be associated with the companies that are in line with their values and are choosing the planet over profits.

In the relentless struggle against climate change, two unsung heroes have emerged from the Earth's embrace - land and forests. While these resources may seem unassuming, they wield unparalleled influence in mitigating the colossal challenge posed by rising global temperatures. Let's delve into the intricate ways in which land and forests play a pivotal role in combating climate change.

The Carbon Dilemma: A Tale of Sinks and Sources

At the heart of the matter lies carbon dioxide (CO2), the notorious greenhouse gas responsible for trapping heat in our atmosphere. Forests, trees, and grasses collectively act as nature's "sinks" for CO2, heroically absorbing a significant portion of this harmful gas emitted through human activities. This process, known as carbon sequestration, is akin to Earth's own carbon capture and storage technology.

Yet, like a multifaceted puzzle, this story isn't solely one of absorption. The land also serves as a source of CO2 emissions, a consequence of activities such as deforestation and land degradation. These actions release stored carbon back into the atmosphere, contributing to the alarming rise in CO2 levels. Thus, understanding the delicate balance between land as a sink and a source is crucial in comprehending its role in the climate equation.

The Dance of Estimation and Uncertainty

Scientists shoulder the responsibility of deciphering the intricate dance between land, forests, and carbon. They endeavor to estimate the net impact of these natural systems on carbon emissions. This intricate task is no easy feat, considering the myriad variables at play - from diverse forest ecosystems to ever-changing human interventions

Enter climate change, a disruptor that further complicates this intricate ballet. Escalating temperatures place stress on forests, rendering them susceptible to devastating wildfires. As landscapes transform, their ability to sequester carbon is jeopardized. In essence, forests, once reliable carbon sinks, are challenged by the very crisis they seek to alleviate.

Peering Through the Numbers: Insights from Research

Research, as a beacon of understanding, illuminates the intricate nuances of this relationship. A study published in Nature Climate Change (2021) unveiled a striking revelation. Over the span of two decades, global forests sequestered twice as much carbon dioxide equivalent (CO2e) as they emitted. This delicate balancing act, led by Nancy Harris and her team at the World Resources Institute, demonstrated that forests annually absorbed approximately 15.6 billion tons of CO2e, overshadowing emissions from disturbances.

In parallel, the Intergovernmental Panel on Climate Change (IPCC) Special Report on Climate Change and Land 2019 corroborated this narrative. Land use, it indicated, contributed to 13% of human-induced CO2 emissions while concurrently acting as a net sink of around 11.2 billion tons CO2 per year. This net carbon absorption equated to a staggering 29% of total CO2 emissions during the same period.

The Green Road Ahead: Reforestation and Beyond

With our planet at a precipice, the preservation and expansion of forests are thrust into the global spotlight. As nations grapple with the inadequacy of emission reductions, reforestation emerges as a beacon of hope. The idea is simple yet profound: by nurturing existing forests and strategically planting new trees, we amplify nature's ability to counteract our carbon emissions.

However, this endeavor poses multifaceted challenges. Land ownership, equitable distribution of benefits, and the true cost of preserving these ecosystems become focal points. It is imperative that the noble cause of reforestation does not inadvertently perpetuate social or economic inequities.

In a world where climate solutions are paramount, the significance of land and forests as allies cannot be overstated. They stand as testament to nature's resilience and offer tangible pathways to confront climate change head-on. As we navigate the path to a sustainable future, the role of land and forests serves as a compelling reminder of the interconnectedness that binds humanity to the environment.

Global warming is affecting the Earth more viciously than expected. The alarming rate at which the glaciers are melting and the sea levels are rising threatens the mass extinction of every species on the planet.

To counter this challenge, governments around the world came together and have designed a market-based system called carbon trading, under the Paris Agreement, to control and regulate the carbon emitted by businesses, especially the ones that are heavily dependent on fossil fuels.

How does carbon trading work?

There are multiple models designed to facilitate carbon trading, but the recent and successful one is the Cap and Trade scheme.

Cap and Trade Scheme

In this scheme, the government sets a limit on the emission over a time period and allots a fixed number of permits to compensate for the pollution. Each carbon permit is equal to one tonne of CO2 equivalent. Therefore, companies need to track their carbon footprint to comply with the carbon trading scheme.

Businesses that effectively reduce their emissions and manage to spare some carbon credits can auction them for money. Similarly, companies who exceed their carbon emission threshold limit can purchase carbon credits from these auctions.

Carbon Offsets

Another way companies aim to compensate for their exceeding their cap limits is by buying carbon offsets in the free market. Carbon offset refers to any activity which reduces the emission of greenhouse gases elsewhere.

Usually, the sellers of these offsets are project developers who design carbon-reducing systems and technology. Hence, each ton of carbon that is avoided polluting the environment counts as one carbon offset.

Advantage of Carbon Trading

Carbon trading has collectively involved the prime polluters from the developed countries to implement technologies that reduce their emissions. As these companies are majorly dependent on fuels, they usually exceed their allotted threshold, and hence are forced to buy carbon credit from the developing nations, providing the latter with the financial aid it needs.

Carbon trading also provides the flexibility to businesses to change their operations at their own pace. For example, small businesses can easily implement the latest technologies to reduce their carbon footprint and auction the spare carbon credits. Likewise, big corporations can buy these carbon credits to compensate for excess carbon emissions.

Disadvantages of Carbon Trading

Although carbon trading has lowered the carbon emission of many businesses, the scheme is still loose-ended and can be exploited by some companies via its loopholes. As the west is adapting to the concept, there�s still a lot of room for its improvement.

Nevertheless, carbon trading schemes are a work in progress and with stricter laws and controlled demand and supply of carbon permits, the scheme can drastically help the world counter global warming