Ipsos Encyclopedia - Environment, Social and Governance (ESG)
The term ESG or Environment, Social and Governance was first used in 2005 as part of the UN Global Compact initiative “Who Cares Wins” to “assist in the integration of environmental, social and governance (“ESG”) issues in investment analysis, processes and decision-making.” Today, ESG has come to represent the dimensions of sustainability outside of investment analysis.
The term ESG or Environment, Social and Governance was first used in 2005 as part of the UN Global Compact initiative “Who Cares Wins” to “assist in the integration of environmental, social and governance (“ESG”) issues in investment analysis, processes and decision-making.” Today, ESG has come to represent the dimensions of sustainability outside of investment analysis.
But the term sustainability is a complex one that refers to the ability to maintain resources for use but also for future generations. Many refer to this as “planet, people and profit” and at Ipsos we refer to sustainability (or ESG) being about “people planet, prosperity”.
It is worth noting that the wide breadth, the long-term focus, and sometimes competing definitions of the term ‘sustainability’ can be a problem in and of itself. It can be a difficult topic to navigate and communicate for governments, businesses and the general public alike.
At Ipsos, we have explored how citizens, employees and people generally interpret the term ‘sustainability’. Sustainability can be understood as an umbrella term with a meaning similar to ESG, but it is also regularly interpreted as predominantly referring to the ‘Environment’ element of ESG – which we can see illustrated in particular in terms such as ‘environmental sustainability’.
The over-arching term “sustainability” has been used more and more often in recent years. Buzzwords abound: net-zero, UN SDGs, LGBTQIA, DEI, climate justice, CSR, etc. But what meaning does it hold for global citizens and is it the same for everyone?
Read more in Talking Sustainability from the Ipsos Almanac 2023.
Sustainability - What It Means to Consumers
The Consumer Voice on Sustainability – Challenges and Opportunities for Brands
Exploring Sustainability and Employee Experience: A study of four major Financial Services Institutions
The UN Sustainable Development Goals (SDGs or sometimes referred to as the Global Goals) were created in 2015 to serve as a "blueprint to achieve a better and more sustainable future for all, " providing guidance for businesses and organisations on specific actions to achieve sustainability. They are a collection of 17 different goals incorporating environmental, social and economic measures, and it is common to hear our clients, both in public and private sectors, refer to the SDGs as informing their wider sustainability strategies.
Many of our clients – and Ipsos - actively subscribe to the UN Global Compact. The Global Compact is a voluntary-based initiative that requires businesses and organisations to commit to, implement, and report on their progress toward the global goals.
Ipsos Point Of View
Ipsos believes that governments and businesses have a mandate to take action and lead on ESG initiatives – and our role is to help them facilitate this.
However, it is essential that Ipsos maintains a balanced, objective view on the data around ESG to ensure our data does the talking and not our passions or our beliefs. This is integral to Ipsos' reputation as a leading global research agency, and particularly relevant for emotive topics like sustainability and climate change.
Ipsos’s global data and insights contribute to three foundational points of view at Ipsos which provide a perspective on ESG and considerations that need to be taken by organisations, brands and businesses.
A Holistic Approach to ESG
Businesses must pursue all three ESG Pillars in tandem. People are increasingly making the link between the ‘E’ for environment and ‘S’ for social, particularly when it comes to planetary health – i.e., that our ability to thrive on this planet is wholly dependant on how we use (or mis-use) precious resources (natural capital and human capital).
And what of ‘G’? If we take the definition of good governance from the United Nations (UN) – “the political and institutional processes and outcomes that are necessary to achieve the goals of development”, then good and positive governance will ensure the delivery against environmental and social objectives. In fact, in the first use of the term ‘ESG’ by the United Nations it was initially proposed that it be called ‘GES’ as Governance was considered central.
Therefore, brands and businesses must ensure they do not have a siloed approach to ESG but take all into account even if emphasis is being placed in a certain direction.
The Say-Do and Believe-True Gaps
Historically, brands and governments have focused their efforts on influencing people's behaviour to close the say-do gap (i.e. the discrepancy between what people say they will do and what they actually do). This means they tend to focus on 'nudge', where positive enforcement and indirect suggestions are used to influence behaviour. However, the complexity of the sustainability topic means that people need more than just nudges. Ipsos challenges this perspective and asks governments and businesses to consider the role they directly play in closing the gap. An emphasis on helping people navigate this space through education and tackling key barriers – as there is much evidence that there is a significant gap in understanding of the steps that citizens they themselves can take.
ESG as a Co-benefit
Often the carrot of a product or service being environmentally and/or social conscious is not enough to entice a public who feel that they are doing enough while industry and government aren’t pulling their weight. Industry and government should therefore seek to position sustainability as a co-benefit to other direct benefits to their customers where possible.
For Commercial Clients
For businesses, ESG is the long-term viability of a business. It is more than corporate social responsibility and it goes beyond corporate reputation. It also goes beyond just environmental sustainability.
A sustainable business integrates long-term stakeholder value into all dimensions of its activities: its supply chain, employee relations, community relations, environmental impact and its governance practices.
The Ipsos Global Reputation Monitor (IGRM) has highlighted the ESG expectations that the population has of multi-national corporations, including how consumers prioritise corporations’ attempts to protect the environment, improve society and practice good governance.
We use the client needs framework (fig 4) to help clients make better decisions around ESG/sustainability. It helps to demonstrate to our clients that the process of becoming more sustainable is ongoing, sequential, and cyclical – not a concrete destination. It can also be helpful in informing clients of what next steps they should focus on in their ESG/sustainability efforts.
A key problem many businesses face is lack of differentiation. We believe that this is due to a lack of understanding on the part of the public about the broader scope of ESG but also due to businesses trying to communicate too much – there are too many labels, too many initiatives and too many words that the public cannot connect with.
The Issue Focus Model, (fig 5) supports clients in understanding where and how they should focus. Organisations and brands need to be careful of jumping to act and talk before there is a strategy in place. They need to ensure that they have a full understanding of the landscape and where they are first, to orientate the business. They then need to think of where they should focus their efforts. This needs to be led from the top of the organisation and take into consideration the impact the organisation is having in all aspects of ESG, what the different stakeholders need, want and expect, what the commercial capabilities are to drive positive change and not least the value that this will provide to the organisation (financial and otherwise).
Organisations also need to consider how their actions and initiatives algin with how people see the organisation and the brands within – is there a gap? This is where perceptions of greenwashing can creep in. Brands and organisations need to be seamless and create intuitive links between what the brand is doing and saying and what it stands for (in the sector, in the world). Then layering on, with honesty, transparency and integrity, where the organisation/brand is on their ESG journey.
https://www.ipsos.com/sites/default/files/ct/publication/documents/2022-05/Volvo_Sustainability_Campaigns_Ipsos.pdf
https://www.ipsos.com/sites/default/files/ct/publication/documents/2022-09/ipsos-views-sustainability-and-advertising.pdf
https://www.ipsos.com/en-uk/making-belonging-joyful-inclusive-representation-advertising-grow-brands
For the public sector
For governments and the public sector, sustainability encompasses economic, social and environmental sustainability. It is often concerned with policymaking and behaviour change to promote, achieve and maintain more sustainable ways of being.
Public sector goals for sustainability are often framed by voluntary or binding commitments or targets. The SDGs are one example of this. Many national governments are also signed up to The Paris Agreement, a commitment to limit global temperature rise to well below 2 degrees Celsius. The UK, meanwhile, has self-imposed a legally binding target to bring all greenhouse gas emissions to net zero by 2050.
Much of Ipsos's work for the public sector helps inform sustainability policy, or evaluate the success of existing policies and initiatives. Our work for NGOs also centres on informing or evaluating their sustainability intiatives, often in order to help them campaign for, or otherwise effect change.
Impact
People often feel powerless in decision-making processes when it comes to ESG/sustainability. Ipsos also believes it is important for governments and businesses to bring people along the impact journey. Governments and businesses should seek to provide people with transparent communications on impact. Monitoring and evaluating the impact of our client's activities is often required for reporting but it also helps to validate investment and provide proof of commitment to the public.
