Cohort: MBA/Post graduate

Course: students
ESG and
Sustainabi
Dr Mayuri Srivastava,
lity Assistant Professor-Senior
Scale
SoB, UPES
 Module 1

ESG and Corporate

Governance: An
Overview
 Session: 01, 02 and 03

ESG
Concepts and Principles; Historical
and Global Trends
Session Outcomes

• ESG: What and Why?

• ESG Integration into Management functions

• Historical perspectives of ESG

• Global trends of ESG

What’s happening: Hue, Cry, War and
More?
 Business = Profit Making; but Why
SUSTAINABILITY?
1. The ECONOMIC Prowess of the Business

https://gfmag.com/data/biggest-company-in-the-world/ https://gfmag.com/data/economic-data/poorest-country-in-the-world/
2. The GLOBAL REACH of the Business:
E.g., Starbucks
 3. Over CONSUMPTION of the natural
resources:

E.g., Coca Cola

https://www.statista.com/statistics/1234225/water-use-ratio-coca-cola-company-globally/#:~:text=The%20Coca%2DCola%20Company%20and,309%20billion%20liters%20in%2020
22
.
People, Planet, Profit?

Generating various aspects

of value creation

• Sustainable Development (Brundtland Commission,

1987): ‘development that meets the needs of the
present without compromising the ability of
future generations to meet their own needs'.

Economic “A way of doing less bad ~ less of

development as the unsustainability ≠ SUSTAINABLE
operative concept ACTIONS
 What’s your view?

How can businesses reimagine economic development to move beyond

simply reducing harm and instead create genuinely regenerative systems
that enhance both present and future well-being?"

ESG Frameworks and Corporate Governance CSR

Regulations Initiatives
 Are CSR & ESG Same?

ESG > CSR

• PepsiCo’s #AwaazMittiKi Campaign

Youtube video: https://www.youtube.com/watch?v=sliYxt4RsKg

https://www.downtoearth.org.in/governance/why-this-is-not-csr-a-study-of-5-major-corporates-74587
Class discussion

In continuance with the last slide, probe students the

difference between CSR activities and ESG, and why
integrating ESG into businesses is essential in today’s
paradigm.
 Introduction to ESG

• Environmental, Social and Provides a structured approach

Governance (ESG) refers to a encapsulating: 2

collection of corporate performance 1. Holistic Evaluation of firm

evaluation criteria that assess the 2. Environmental Assessment

robustness of a company’s 3. Social Impact Analysis

governance mechanisms and its 4. Governance Evaluation

ability to effectively manage its 5. Risk Management Tool

environmental and social impacts.1 6. Stakeholder Consideration

7. Performance Indicator
8. Ethical Impact Assessment
1 https://www.gartner.com/en/finance/glossary/environmental-social-and-governance-esg-
2 Armstrong, Anona, Ethics and ESG, Australasian Accounting, Business and Finance Journal, 14(3), 2020, 6-17. doi:10.14453/aabfj.v14i3.2
Environmental Governance

 Focus on a company's  Deals with a

impact on the natural company's
environment leadership, internal
 Key areas: Climate controls, and
change, resource shareholder rights
depletion, waste,  Key areas: Board
pollution, composition,
deforestation executive
compensation, audit
committee structure,
business ethics

Social
 Concerns a company's relationships with people
and society
 Key areas: Labor relations, diversity and inclusion,
human rights, consumer protection, community
impact
What’s your view?

"How do companies effectively integrate ESG

considerations into their operations and decision-making
processes?"
 ESG Integration
 Incorporating ESG into corporate strategy:
• Embed ESG considerations in mission, vision, and values
• Integrate ESG goals into strategic planning processes

https://about.nike.com/en/impact

16
ESG Integration
 ESG in risk assessment and management:
• Include ESG factors in enterprise risk management frameworks
• Develop scenarios for climate-related risks and opportunities

https://www.unilever.com/sustainability/climate/our-clima
te-transition-action-plan/
ESG Integration
 ESG considerations in investment decisions:
• Incorporate ESG criteria in capital allocation processes
• Evaluate ESG impacts of major business decisions
https://www.blackrock.com/corporate/literature/publication/blk-esg-investment-statemen
t-web.pdf
ESG Integration
 Operational integration of ESG principles:
• Implement ESG-focused policies and procedures
• Establish ESG-related KPIs for different business units

https://www.nvidia.com/en-in/about-nvidia/company-policies/
 Challenges of ESG Integration
1. Balancing financial goals with ESG goals:
• Potential short-term costs of implementing ESG initiatives
• Pressure from shareholders for immediate returns vs. long-term sustainability
• Difficulty in quantifying long-term ESG benefits in financial terms

2. Measuring and quantifying ESG impacts:

• Lack of universal, standardized metrics for ESG performance
• Challenges in collecting reliable and consistent ESG data
• Complexity in attributing specific ESG actions to measurable outcomes

3. Aligning ESG strategies across different departments, operations at

firm level:
• Varying priorities and objectives among different business units
• Developing integrated reporting systems that capture ESG data from all parts
of the organization
20
 Class Discussion
Discuss: Transformation Realized Series: How can Sustainability and ESG metrics create
competitive differentiation
https://publish-ey-prod-cdn.adobecqms.net/en_in/ceo/transformation-realized-series/how-can-sus
tainability-and-esg-metrics-create-competitive-differentiation
 Unlocking the hidden value of ESG for your
organization

• TEDxWhyteAve

• Title: Unlocking the hidden value of ESG for your

organization

• Link:https
://www.ted.com/talks/majid_mirza_unlocking_the_hidden_val
ue_of_esg_for_your_organization?subtitle=en
What’s your view?

What is the way forward for businesses in the context of

ESG and Sustainability?
Class Discussion

What led to the emergence of the concept of ESG?

 https://www.counterpunch.org/2
024/05/27/calls-for-divestment-fr

Heard of Apartheid Divestment?

om-apartheid-south-africa-gave-t
odays-pro-palestinian-student-ac
tivists-a-blueprint-to-follow/
What was Apartheid divestment?

• Apartheid divestment was a global movement during the 1970s and 1980s.

• It sought to end South Africa's system of racial segregation and discrimination,

known as apartheid, by pressuring companies, institutions, and governments to

withdraw investments from the country.

• The movement aimed to isolate the South African economy and create

economic pressure on the government to dismantle apartheid policies (oppress

black people).
 So, historically………………leading to
ESG
• Pioneering Social Responsibility: First large-scale efforts where

investors and companies were pressured to act based on social justice

issues.

• Catalyst for ESG Thinking: The movement highlighted the power of

institutional investors, like pension funds and universities, to influence

corporate behavior through divestment.

• Global Impact: Showed that collective action on social issues could lead to

significant political and social change

• Foundation for Modern ESG Criteria: Exemplified how ethical issues

The growing emphasis on ESG: WHY?

• An open discussion leading to the next slide which

explains why the upsurge in the context of ESG
ESG in the 21st Century: A Growing
Movement
• The rise of sustainability reporting (e.g., Global
Reporting Initiative)
• Introduction of ESG ratings and indices (e.g., MSCI, S&P
Global)
• Growing investor interest in ESG factors
https://www.spglobal.com/esg/solutions/esg-scores
-data
Global Trends in ESG: Key Drivers

• Begin by discussing what possibly could be the key

drivers-relate with the last slide in the following context

• Climate change and environmental sustainability as

major drivers
• Social movements (e.g., diversity, equity, and inclusion)
• Governance reforms driven by financial crises and
scandals
Volkswagen: The emission scandal of
2015?
• https://www.bbc.com/news/business-34324772 (Reading: BBC News
Article)
• Youtube video: https://www.youtube.com/watch?v=yqSw_7GW-DE
(INSERT)
 The aftermath-Volkswagen Emission
Scandal, 2015

https://money.cnn.com/2015/09/24/investing/volkswagen-vw-
emissions-scandal-stock/

https://www.reuters.com/article/world/vw-investors-sue-for-billions-of-dollars-over-diesel-sca
ndal-idUSKCN1LQ0XR/
Key takeaways : Volkswagen’s emission
scandal of 2015

• "Defeat devices" in ~11 million diesel vehicles worldwide

• Software cheated emissions tests; 40x legal NOx emissions in

normal driving

• Discovered by US Environmental Protection Agency (EPA) in 2015

• $30+ billion in fines, penalties, and compensation

• Accelerated industry shift towards electric vehicles

 Summary
• Businesses must incorporate sustainability due to their economic
influence, global reach, and the challenge of resource overconsumption.

• ESG (Environmental, Social, Governance) represents criteria for

evaluating corporate behavior and impacts on society and the
environment.

• Integrating ESG into management practices enhances risk management,

drives innovation, and improves stakeholder trust.

• ESG has transitioned from a compliance-focused approach to a strategic

necessity, influencing investment decisions and corporate reputation.
The way forward?

• Significance of “Corporate Governance”

Readings:
• News article-
1. https://www.counterpunch.org/2024/05/27/calls-for-divestme
nt-from-apartheid-south-africa-gave-todays-pro-palestinian-s
tudent-activists-a-blueprint-to-follow/

2. https://www.bbc.com/news/business-34324772
• Research Article-
1. Valentini, C., & Kruckeberg, D. (2018). “Walking the environmental
responsibility talk” in the automobile industry: An ethics case study of
the Volkswagen environmental scandal. Corporate Communications:
An International Journal, 23(4), 528-543.