Why we must simplify our approach to ES(G)

Achieving our environmental and social goals will be crucial to our survival as a species and to our democracies. Sergio Scandizzo analyses the “environmental, social, and governance” (ESG) criteria and the difficulty in identifying what each component is supposed to measure. He suggests focussing on the alignment to the EU taxonomy and the amount of taxes paid, and removing “governance” from ES(G). 

The fundamental problem of modern societies is how to limit our impact on the planet’s finite resources while keeping social inequality at an acceptable level. In fact, it appears reasonable to posit that we are unlikely to survive as a species beyond a certain increase in average temperature and as a democratic society beyond a certain level of inequality. What those two levels are and how to measure them could prove controversial, as we do not know to what extent the former is attainable and the latter desirable.

Indeed, while most people would agree that the depletion of scarce natural resources (which include a liveable climate) should be contained, there is widespread disagreement on what level of environmental impact is feasible to attain given the present state of technology and current and desired levels of economic development across the world. On the other hand, while almost everybody would concur that excessive social inequality – especially if it means many people living in squalor – is undesirable, only a small minority is likely to advocate a perfectly uniform distribution of wealth and income.

Since it is the scale and nature of our economic activities that drive both the degradation of our natural environment and the increase in inequality, only substantial changes in such activities can reduce and possibly reverse those trends. Furthermore, as governments cannot mobilise, let alone provide by themselves the full amount of the gigantic resources needed, it is reasonable to expect that only a substantial redirection of investments across countries, sectors and firms can hope to achieve tangible results. While there are signs that governments are trying to foster such a redirection through policy changes – the EU taxonomy being the most articulated example – the role of the private enterprise in this collective endeavour remains ambiguous. It is therefore time to look at how business firms contribute to the solution of those problems.

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Πηγή:  blogs.lse.ac.uk

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