Understanding ESG: Environmental, Social, and Governance Importance

Today, organisations are no longer judged solely by their financial performance. Stakeholders now expect organisations to act responsibly, consider their environmental footprint, support social progress, and operate with transparency and integrity. As a result, Environmental, Social, and Governance (ESG) factors are now part of standard organisational decision-making.

The numbers reflect this change. According to PwC's Global Investor Survey, 75% of investors believe companies should disclose ESG-related risks, even if doing so impacts short-term profits. This highlights a growing demand for long-term thinking and responsible business practices.

Failing to address ESG responsibilities can lead to significant problems for organisations. It can damage their reputation, lead to legal fines, and cause stakeholders to lose confidence. On the other hand, companies that follow ESG principles are better prepared to handle challenges, build stronger ties with their communities, and grow stably and responsibly.

In this article, we’ll explore what ESG involves, why it matters, and how your organisation can integrate ESG principles into everyday operations.

TL;DR

• What ESG stands for: ESG refers to Environmental, Social, and Governance factors that help organisations measure how responsibly they operate across these three key areas.
• Global pressure for ESG integration: Due to rising regulations and stakeholder expectations, companies are increasingly required to treat ESG as a core part of their business strategy, beyond just compliance.
• How ESG benefits organisations: Adopting ESG principles strengthens reputations, reduces legal and operational risks, and creates long-term value for both shareholders and society.
• Key steps to building ESG capability: Building ESG capability involves top-down leadership support, clear ownership across teams, and consistent, transparent communication on progress and challenges.

What is ESG and Why is it Important?

ESG stands for Environmental, Social, and Governance. It is a way for companies to manage their responsibilities beyond just making a profit. ESG helps businesses consider how their actions impact the environment, their treatment of people, and their operational practices.

Instead of treating ESG as a separate project, organisations need to make it part of their day-to-day work. This involves examining how business operations impact the planet, ensuring that employees and communities are treated fairly, and ensuring that leadership acts with honesty and accountability.

Governments worldwide are also increasing pressure on businesses to act. For example, the European Union’s CSRD now requires detailed ESG reporting, India’s BRSR mandates sustainability disclosures for listed companies, and the United States is moving forward with climate-related reporting rules through the SEC.

Nigeria has adopted the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards (S1 and S2), requiring public interest entities to disclose sustainability-related information in their financial reports. Compliance is mandatory for reporting periods commencing on or after January 1, 2028, with small and medium-sized entities required to comply by January 1, 2030.

Why ESG matters:

• Reduces Legal and Regulatory Risks: Aligning with changing ESG reporting standards helps avoid penalties and ensures smooth regulatory audits.
• Strengthens Trust with Investors: Investors are increasingly evaluating ESG performance alongside financial performance, making responsible companies more attractive for long-term investment.
• Builds Loyalty with Customers and Employees: Customers and employees prefer to support and work for businesses that reflect their values around sustainability, social responsibility, and ethical conduct.
• Lowers Operational Risks: Improving supply chain transparency and ensuring suppliers follow ethical and environmental standards reduces the chance of disruptions.
• Protects Brand Reputation: Proactively managing environmental and social risks reduces the likelihood of public backlash, media scrutiny, or consumer boycotts.
• Unlocks New Market Opportunities: ESG-driven innovation in products and services helps meet the growing demand for sustainable and socially responsible solutions.
• Enhances Long-Term Financial Stability: Identifying and mitigating risks related to environmental fines, social unrest, or governance failures strengthens financial resilience.
• Positions the Company as a Responsible Leader: Being a leader in ESG practices improves competitiveness and helps attract strategic partnerships and new business opportunities.

For organisations ready to take the next step, Corpoladder offers the ESG & CSR Certification Course. This 35-hour programme is designed to help teams transform ESG awareness into practical action. Through interactive learning and real-world case studies, participants learn how to integrate ESG into daily operations, align with global reporting standards, and develop strategies that meet both compliance needs and stakeholder expectations. 

By the end of the course, your organisation will have the tools and knowledge to lead ESG initiatives confidently and responsibly.

This foundation sets the stage for a closer look at the three pillars of ESG and how they apply in practice.

Understanding the Three Pillars of ESG

ESG is structured around three core pillars that work together to build responsible and sustainable business practices. Each pillar addresses a specific area of focus, starting with the environmental impact of business operations.

Environmental

The environmental pillar addresses how your organisation manages its impact on the natural environment, including resource use, waste management, and emissions control. This covers the amount of energy you use, how you manage waste, and how you utilise natural resources.  It also examines whether your activities contribute to pollution or climate change. 

Real-Life Example:

Microsoft has committed to becoming carbon negative by 2030. This means the company plans to remove more carbon from the atmosphere than it emits. To achieve this, Microsoft is reducing emissions across its operations, shifting to renewable energy, improving data centre efficiency, and investing in carbon removal technologies. 

This commitment sets a clear example of how large organisations can take meaningful action to address climate change and lead by example in the environmental space.

What you can do:

• Conduct a detailed carbon footprint assessment covering direct and indirect emissions.
• Set measurable environmental targets such as reducing emissions by a specific percentage over three years.
• Partner with suppliers who follow sustainable practices.
• Monitor and report energy, water, and waste metrics on a regular basis.
• Train employees on environmentally responsible practices within their roles.

Focusing on the environment is only one part of ESG. Next, it is essential to consider how your organisation supports people and communities.

Also Read: How to Improve Creative Thinking Skills in 5 Steps.

Social

The social pillar addresses how your organisation supports the people connected to its operations. This includes employees, suppliers, customers, and the broader communities where you work. Social responsibility is not just about following regulations. It involves creating a workplace and supply chain that is fair, safe, and inclusive for everyone involved.

Real-Life Example:

Unilever provides a clear example of the social pillar in action. The company runs the "Unilever Sustainable Living Plan," which includes commitments to fair labour practices, improving employee health and wellbeing, and promoting diversity and inclusion at all levels. 

Additionally, Unilever works closely with suppliers to ensure ethical sourcing and invests in community programmes aimed at improving livelihoods in the areas where it operates.

What you can do:

• Carry out diversity and inclusion audits regularly to identify gaps and make improvements
• Develop and enforce policies on anti-discrimination, harassment prevention, and workplace safety
• Set measurable social impact objectives for leadership and include them in performance evaluations
• Collaborate with suppliers to assess and enhance their labour practices to ensure they meet ethical standards
• Provide continuous training for employees on workplace ethics, employee rights, and safety protocols

Corpoladder’s Emotional Intelligence for Leaders course helps organisations embed social responsibility into leadership behaviour. Policies alone cannot build inclusive and supportive workplaces; leaders must develop the skills to manage people with empathy, resolve conflicts thoughtfully, and foster positive team dynamics. 

This five-day programme provides practical training to help leaders build emotional intelligence, strengthen collaboration, and create work environments where social responsibility becomes part of everyday leadership practice.

Once social responsibilities are addressed, the next step is to ensure these efforts are reinforced through strong governance structures that guide ethical decision-making and accountability.

Governance

Governance is about how your organisation makes decisions and ensures those decisions are ethical, legal, and transparent. It involves establishing clear systems and processes that enable your business to operate fairly and responsibly. 

Good governance minimises risks such as fraud, corruption, and poor leadership decisions. It builds confidence among stakeholders by showing that the company is managed with integrity and is accountable for its actions.

Real-Life Example:

In 2021, Starbucks enhanced its governance approach by introducing a comprehensive third-party civil rights audit. This audit reviews the company’s policies and practices related to diversity, equity, and inclusion, ensuring transparency and accountability at the highest levels of the organisation. 

By voluntarily undergoing external audits and publishing the findings, Starbucks demonstrates how strong governance can build stakeholder trust and reinforce ethical leadership practices.

What you can do:

• Set up a dedicated ESG committee within the board or assign clear ESG oversight responsibilities to senior leaders.
• Include ESG risks and opportunities in the organisation’s broader risk management and strategic planning processes.
• Carry out independent audits focused on ESG compliance to identify gaps and address them early.
• Update governance policies regularly to reflect changes in regulations, market expectations, and ESG best practices.
• Share ESG performance updates in annual reports and stakeholder communications to ensure transparency and build trust.

By integrating environmental, social, and governance (ESG) considerations into their daily operations, organisations can enhance their resilience, comply with regulatory requirements, and build lasting stakeholder trust.

Also Read: Building a High-Performance Culture: Corpoladder's Blueprint for Success.

Roles Across the Organisation: Who Owns ESG?

Successfully embedding ESG into your organisation requires cross-functional collaboration. Each department plays a specific role in making ESG goals actionable and measurable. Below is a breakdown of how different teams contribute to this process.

Operations and Supply Chain

Operations and supply chain teams play a crucial role in achieving ESG goals, as they are directly involved in sourcing materials, managing logistics, and overseeing the utilisation of resources. 

Making these processes more sustainable helps reduce environmental impact and leads to cost savings, improved supplier relationships, and a stronger brand reputation.

Example:

Unilever demonstrates its commitment to ESG through its focus on sustainable sourcing. The company requires its suppliers to follow the Unilever Responsible Sourcing Policy, which includes clear guidelines on environmental management, labour rights, and ethical business practices. This approach helps Unilever maintain supply chain integrity while promoting sustainable and socially responsible sourcing.

How to put into practice:

• Partner with certified suppliers: Collaborate with suppliers who meet recognised sustainability standards like Fair Trade, FSC, or GOTS to reduce risks and enhance transparency.
• Optimise delivery routes: Improve fuel efficiency and lower emissions by optimising transportation methods and using local suppliers where possible.

Corpoladder’s Effectively Managing a New Team course provides specific support for leaders managing operations and supply chain teams. Building a responsible supply chain requires managers who can align daily decisions with ESG priorities, communicate clearly with suppliers, and engage their teams in sustainability practices. 

This five-day programme gives new managers the tools to lead with confidence, address team challenges, and implement ethical sourcing and operational strategies that drive both performance and ESG impact.

Human Resources

The HR function is central to creating workplaces that are inclusive, fair, and supportive. It involves more than hiring and policy-making; it requires actively building a culture where diversity is valued, well-being is prioritised, and all employees feel respected and engaged.

Example:

Salesforce links diversity, equity, and inclusion (DEI) goals directly to executive performance evaluations. This ensures accountability at the highest levels and sends a clear message that creating an inclusive culture is a business priority, not an optional initiative.

How to put it into practice:

• Conduct equity audits regularly: Review hiring, promotions, pay equity, and leadership representation to identify gaps and ensure meaningful improvements.
• Develop mental health and wellbeing programmes: Go beyond basic support by offering counselling, flexible work options, and wellbeing resources to meet diverse workforce needs.
• Provide training for diverse teams: Offer training to managers on leading diverse teams, addressing unconscious bias, and creating a psychologically safe environment.
• Set measurable DEI goals: Establish clear diversity, equity, and inclusion objectives and report progress transparently to employees and stakeholders.

Building this kind of culture creates stronger employee engagement, improves retention, and supports ESG goals by making social responsibility part of everyday people management.

Also Read: 7 Essential HR Skills Every Professional Should Master.

Finance and Investor Relations

Finance and investor relations teams play a crucial role in ensuring that ESG is integrated into the organisation's financial strategy. They are responsible for identifying ESG risks and opportunities, reporting them transparently, and making sure ESG factors are considered when making financial decisions. This helps build investor confidence, improve access to capital, and reduce long-term financial risks.

Example:

BlackRock integrates ESG scores into its portfolio management process, influencing where and how it invests. This approach not only helps manage risk but also drives investments toward companies that prioritise sustainability and ethical governance.

How to put it into practice:

• Use recognised ESG reporting frameworks: Implement frameworks like SASB and TCFD to provide transparent and comparable ESG data to investors.
• Incorporate ESG in capital allocation decisions: Prioritise investments in projects that align with sustainability goals and contribute to carbon reduction.
• Share regular ESG updates: Keep investors and stakeholders informed on ESG performance to maintain transparency and build trust.
• Engage with investors: Directly interact with investors to understand their ESG expectations and communicate alignment with the organisation's financial goals.

By integrating ESG into financial and investment strategies, organisations can enhance long-term value, attract responsible investors, and stay competitive in a market that increasingly rewards sustainable business models.

Legal, Risk, and Compliance

The legal, risk, and compliance teams are responsible for ensuring that the organisation follows all ESG-related laws and standards. Their role goes beyond avoiding legal penalties. They help the company identify potential risks early, close compliance gaps, and create a culture of transparency and accountability. This is essential for staying compliant with ESG regulations, which continue to evolve across industries and regions.

Example:

Microsoft does it through its Supplier Code of Conduct. The company requires its suppliers to adhere to strict guidelines regarding human rights, environmental impact, and ethical business practices. 

Microsoft regularly audits its suppliers to verify compliance, thereby reducing risks associated with unethical sourcing or labour violations. This proactive approach protects the company from legal risks while strengthening trust with partners and customers.

What to do:

• Create a compliance roadmap: Track current ESG regulations and stay proactive to avoid compliance issues.
• Update internal policies regularly: Ensure all departments understand and comply with updated ESG standards.
• Work closely with risk management teams: Identify potential ESG risks early, such as supplier non-compliance or environmental liabilities, and address them promptly.
• Train employees on ESG compliance: Educate employees across all departments to apply ESG requirements consistently in daily operations.
• Use monitoring tools: Continuously track ESG compliance to identify and address potential issues before they escalate.

Strong ESG compliance reduces legal risks, protects the organisation’s reputation, and builds long-term stakeholder trust. It also positions the company as a responsible and forward-thinking leader in its industry.

Also Read: Why Emotional Intelligence is Key in Leadership.

Executive Leadership and Board

Executive leadership and the board play a key role in making ESG part of the overall business strategy. The way they act and make decisions influences how the entire organisation approaches ESG. When top leaders actively prioritise ESG goals, it motivates all departments to take action and creates clear accountability throughout the company.

Example:

Intel shows how leadership can take direct responsibility for ESG by including it in board-level discussions. The company’s Corporate Governance and Nominating Committee reviews how well Intel is meeting its goals for environmental sustainability, diversity, inclusion, and corporate responsibility. 

This means that ESG is not treated as a separate initiative, but rather is integrated into the company’s broader business strategy and risk management planning.

How to put it into practice:

• Make ESG a regular topic in board meetings: Ensure leadership stays focused on ESG by discussing it in board meetings or assigning it to a dedicated committee.
• Connect executive goals to ESG performance: Link executive incentives and goals to ESG targets like reducing emissions, improving diversity, and creating sustainable supply chains.
• Keep stakeholders informed: Regularly report ESG progress and challenges to shareholders and stakeholders to build trust and show long-term commitment.

Corpoladder’s Leadership and Strategy: For Senior Executives course helps organisations equip their top leadership with the strategic skills needed to lead ESG integration effectively. Embedding ESG into business strategy requires senior leaders to balance financial objectives with sustainability commitments, handle change across departments, and communicate the organisation's ESG vision with clarity. 

However, even with leadership commitment, organisations often encounter significant challenges when trying to execute ESG initiatives successfully.

Challenges Organisations Face in ESG Execution

Even when leadership is committed to ESG, organisations can often face difficulties during implementation. These issues can slow progress or create confusion between teams if not managed carefully.

• Data Inconsistency: ESG data often comes from multiple departments, each using different systems or formats. This makes it difficult to combine information into one clear picture of ESG performance. Without a standard approach, tracking and improving ESG efforts become harder.
• Short-term Focus: Many companies prioritise short-term profits over long-term sustainability goals. This mindset can make it difficult to invest in ESG projects that take time to deliver results, even though they are crucial for long-term success and compliance.
• Greenwashing Risks: Some companies make ESG claims without sufficient evidence to support them. This can lead to accusations of greenwashing, where organisations are seen as misleading stakeholders about their ESG efforts. To avoid this, businesses must communicate their ESG progress clearly and with tangible evidence.
• Limited Expertise: ESG remains a relatively new area for many organisations. Without in-house experts to guide strategy, reporting, and compliance, it becomes harder to meet evolving ESG requirements or design effective programmes.

Recommendation: Start with small ESG goals that are easy to measure and report. Provide training for teams and engage ESG experts as needed. Focus on honest, clear reporting from the beginning to build trust and make it easier to expand ESG activities over time.

To overcome these challenges, organisations often require external support to guide their ESG journey, develop internal capabilities, and scale their efforts with confidence.

Also Read- Top 10 Leadership Development Programs of 2025

How Can Organisations Build ESG Capability with Corpoladder?

Building ESG capability across an organisation requires more than just setting policies. It involves helping leaders and employees at every level understand how ESG connects to their daily work. Corpoladder provides role-specific training programmes that make ESG practical and actionable, helping teams turn strategy into real results.

Our courses focus on Leadership Development, ESG (Environmental, Social, and Governance), and Change Management, with each designed to meet specific industry needs and challenges.

Why organisations choose Corpoladder for ESG training:

• Role-Specific Learning Paths: Training is tailored for board members, senior executives, middle management, and operational teams. Each group learns exactly how ESG fits into their roles and responsibilities.
• Flexible Delivery Options: We offer on-site workshops, live virtual sessions, and self-paced modules to meet different learning styles and schedules.
• Industry-Relevant Content: Our courses are developed with ESG experts and business leaders to ensure the lessons are practical and reflect real business scenarios.
• Hands-On Application: Programmes use real-world case studies, interactive exercises, and scenario-based learning so participants can apply what they learn immediately.
• Custom Programme Design: Learning pathways are built to match each organisation’s ESG goals and business strategy, ensuring the training is relevant and focused.

Our flagship ESG & CSR Certification Course helps organisations build long-term ESG capability by combining strategic learning with practical implementation. With this course, teams gain the tools they need to meet regulatory requirements, reduce risks, and drive positive change across the organisation.

Conclusion

ESG is helping organisations make real improvements in how they manage risks, reduce environmental harm, include more diverse voices, and build long-term success. By focusing on practical steps in sustainability, social responsibility, and governance, organisations are solving everyday challenges in a clearer and more accountable way.

At Corpoladder, we equip your organisation with the skills required to embed ESG effectively and responsibly. Through targeted training in ESG strategy, reporting, and leadership development, we prepare teams to drive meaningful impact.

Get in touch with us to discover how our programmes can strengthen your workforce and translate ESG initiatives into tangible organisational outcomes.

FAQs

1. What’s the difference between ESG and CSR?
CSR is often philanthropic and voluntary. ESG is strategic, data-driven, and tied to business outcomes. It focuses on long-term value creation through sustainability, ethical practices, and transparent governance.

2. Why is ESG important for long-term business success?
ESG helps companies manage risks, meet regulatory expectations, and build stronger relationships with investors, customers, and employees. It promotes sustainable growth, supports resilience against market changes, and protects the organisation from future disruptions.

3. Can small businesses adopt ESG?
Yes, small businesses can start with manageable ESG initiatives. This could include improving energy efficiency, creating fair hiring policies, and ensuring responsible supplier practices. Small actions taken consistently can build a foundation for broader ESG commitments over time.

4. How can companies avoid greenwashing?
Greenwashing happens when companies exaggerate or misrepresent their ESG achievements. To avoid this, businesses should set clear, measurable ESG goals and share real data to back up their claims. Using third-party audits or certifications can also add credibility and reduce the risk of misleading stakeholders.

5. How do ESG efforts impact company reputation and stakeholder trust?
Companies that take ESG seriously often build stronger reputations and greater stakeholder trust. Customers, investors, and employees are more likely to support businesses that act responsibly and transparently. A good ESG track record also protects companies from reputational risks, making it easier to attract partnerships, talent, and long-term investment.