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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.

The Sustainable Development Goals (SDGs) are also known as the Global Goals. These were adopted by the United Nations, in 2015. A universal call to action to end poverty, protect the planet, & ensure that by 2030 all people enjoy peace and prosperity.

Sustainable Development goals are The 17 SDGs are integrated - They recognize that action in one area will affect outcomes in others and that development must balance social, economic, and environmental sustainability.

The 17 SDGs are:

1. No Poverty,
2. Zero Hunger,
3. Good Health and Well-being,
4. Quality Education,
5. Gender Equality,
6. Clean Water and Sanitation,
7. Affordable and Clean Energy,
8. Decent Work and Economic Growth,
9. Industry, Innovation, and Infrastructure,
10. Reducing Inequality,
11. Sustainable Cities and Communities,
12. Responsible Consumption and Production,
13. Climate Action,
14. Life Below Water,
15. Life On Land,
16. Peace, Justice, and Strong Institutions,
17. Partnerships for the Goals.

All countries have committed to prioritizing progress for all those who're the furthest & behind. The SDGs are designed to help with and end poverty, remove hunger, control AIDS, set the right ideals to end discrimination against women & girls.

Though all the goals are broad & interdependent, two years later, on 6 July 2017; the SDGs were made more “workable” & "actionable" by a UN Resolution which was adopted by the General Assembly. The resolution identifies specific targets for each goal to be achieved, along with indicators that will be used to measure progress towards each target. While the rest of the target years lie between 2020-2030; for others, the end date is not yet provided.

The thought, the creativity, the know-how, the technology & the financial resources from all of society is necessary to achieve the SDGs in every context. Only with everyone’s support, we can begin to think of a better tomorrow. Deeply analyzed progress charts & presentations for all the SDGs are published in the form of reports by the United Nations Secretary-General on their official channels. The most recent one is from April 2020.

Along with that, there is also a widespread consensus is that: The progress on all of the SDGs will be stalled if Women's Empowerment & Gender Equality are not prioritized, & treated holistically with all intentions to take them forward. The SDGs are a sign to policymakers as well as private sector executives and board members to work towards gender equality and women empowerment harder as the rest of the other SGDs have deadlines and we will probably miss them if these two prioritized ones don’t get momentum & begin to see some change.

Implementation of the SDGs started worldwide in 2016. This process can also be called "Localizing the SDGs" for the people and territories. For eg; Individual people, universities, governments, institutions & organizations of all kinds work are working separately but one or more goals at the same time which aligns the collective growth in the same direction.

SDGs provide us the framework through which we can move ahead into a more peaceful, prosperous, equal for all, green future. And each country has a role to play in achieving them.

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