Two acronyms are attracting a lot of attention and causing questions and controversy these days: ESG and DEI. ESG stands for Environmental, Social and Governance Factors and DEI is the acronym that stands for Diversity, Equity and Inclusion. The two together create long-term sustainability for organizations, especially when considering the priorities of future generations.
The predecessor of ESG
Corporate social responsibility (CSR) is a business practice that promotes sustainable development. In the world, CSR took its first steps in the early 1970s, when various civil rights movements and environmental organizations changed society’s understanding of business.
After the financial crisis of 2008, CSR actions began to decline as companies looked for ways to limit their resources and costs in order to survive. CSR set the foundation and ESG builds on it to reach the impact it has now in the world.
S of ESG is DEI
Companies with high ESG scores are more likely to be diverse, culture-oriented organizations, as diversity, equity and inclusion (DEI) practices strengthen them. The social component of ESG encompasses all the ways companies interact with their employees and the communities in which they operate. Diversity, equality and inclusion are part of the “S” part of ESG.
How does DEI affect ESG?
DEI should be the foundation for an organization’s ESG strategy, as programs that are created with diversity, equity and inclusion in mind also enhance a company’s sustainability and success. Today, the delivery of shareholder value is shifting in favor of stakeholders. ESG should be part of the strategy because it adds value. As the competition to attract socially responsible investors, consumers and employees increases, these two intertwined strategies will only grow in importance.
