- Companies are interested in ESG management to minimize corporate losses amid the climate change crisis and to operate a sustainable business
- ESG(Environmental, Social, and Governance) factors is a non-financial element just like decarbonization, social contribution, and business ethics, and is emerging as a major element of business for global corporations.
Recently, there has been an increase in social and economic damage all over the world due to the pandemic and abnormal climate phenomena. Companies facing the crisis of ‘climate change’ have become interested in ESG (Environmental, Social, and Governance) factors in an effort to minimize losses and operate a sustainable business. ESG is a non-financial element just like decarbonization, social contribution, and business ethics, and is emerging as a major element of business for global corporations.
For the Earth to survive, the rise in temperatures must be limited to 1.5 degrees Celsius and carbon neutrality must be ensured by 2050. As countries sign up for the Paris Climate Agreement, corporations and governments are taking the responsibility for its implementation. To achieve this goal, carbon emissions must be reduced as compared to the last century by close to between 30% and 50%. As the current global temperature is rising rapidly, companies should be more vigilant to implement changes quickly.
So under these circumstances, what can companies do in regard to ESG factors?
First of all, eco-friendly solutions with low carbon emissions or new renewable energy can be used for the environmental (E) factor, which has been garnering a lot of attention lately. Additionally, efficient resources can be used, such as recycled boxes instead of single-use plastic packaging. As a result of this, it becomes possible to reduce greenhouse gases, which are a major factor in climate change.
In terms of the social (S) aspect, we can set goals such as having 50% of all personnel, 40% of frontline managers, and 30% of leadership teams be hired as women in order to guarantee gender diversity among employees and provide equal opportunities to all with our ‘50-40-30’ strategy. Furthermore, education can be provided to people of all generations, creating opportunities for the next generation and ensuring that the underprivileged have the opportunity to get a decent job.
Finally, in terms of governance (G), we must live up to the principle of trust and uphold ourselves and those around us to high social governance and ethical standards. This is to establish a process that can provide decent work to all employees of company suppliers or report behaviors that are contrary to our principles of trust and the definition of the International Labor Organization (ILO). By doing this according to the characteristics of the community in each region, companies, individuals, and partners alike can realize the goal of sustainability.
To successfully establish ESG, a consensus must be formed not only with the CEO or executives within a given organization but throughout the entire organization. Also, it must be embedded in all work and actions and undertaken by the company. Values such as diversity, inclusion, openness, and ethics should be a part of every business. Leaders must continuously raise customer expectations by reinforcing originally set goals every three to five years through constant measurement and recalibration.
And along with a shared vision with customers and suppliers, all members must work together in a coalition to build a larger ecosystem. As we are just one cog in the wheel, we need to give support so that the sustainability commitments can extend all around them. All of these are social responsibilities that companies must bear today, and they are being increasingly valued by investors as well as employees and customers.
These activities are currently being introduced by Schneider Electric, to which I belong. Through this, we are making practical efforts to meet ESG and continuously assessing whether they are being operated properly within the organization. Over the past 15 years, these efforts have begun to see results, and Schneider Electric is being evaluated as a great place to work all around the world. We are proud to be considered as an employer of choice as the new generation is looking for these elements and want to work in places that are recognizing all these values. I think that other companies can also achieve this if they implement an effective strategy of sustainability in this same way.
As of late, many Korean companies are showing a move to actively introduce ESG management. Korea is leading not only in the semiconductor market but also in the electric vehicle industry, which is set to become a major player in the change toward decarbonization. Leading sustainability with such advanced technology is very meaningful for Korean companies that are building infrastructure for digitalization and the reduction of power consumption. And if the aforementioned are performed well, companies will be able to successfully implement ESG and become sustainable companies, protecting the planet and staying with customers as a healthy business for a long period of time.
Schneider Electric’s journey for sustainability: