Good Corporate Citizen/ Business Resilience
ESG establishes what a business needs to do to be a “good corporate citizen”.
To be a good corporate citizen, a business firstly needs to comply with all measures having the force of law that are applicable to it, including statute and common law, regulatory rules and other legal obligations/duties (see under “Legal Compliance”). Increasingly though, legal compliance alone is regarded as insufficient and the ESG concept embraces a good deal more.
ESG secondly recognizes that, in the interests of stakeholders (such as suppliers, customers, tenants, employees, shareholders, investors, suppliers of finance, neighbours and the community at large), businesses should, in relation to their activities and conduct, also meet other relevant domestic (and often international) codes, standards and behaviours, including appropriate standards of business ethics and morality, as well as others’ reasonable requirements and expectations. More widely, it also embraces “sustainability”, i.e. all of a business’ efforts to reduce its negative impacts, and increase its positive impacts, on the world around it.
The “good corporate citizen” and sustainability aims are important aspects of ESG, but ESG is ultimately about resilience of businesses. The Covid-19 pandemic has led to an increased focus on business resilience. If a business complies with ESG “good corporate citizen” and sustainability principles, laws and behaviours, it not only benefits stakeholders and the environment, it also renders it more resilient, i.e. it makes it more likely to survive and succeed. In contrast, failure to comply can ultimately damage the business, its goodwill and reputation, or it can prevent it from meeting its maximum potential (see under “Why you should take ESG on board”).