What’s the difference between ESG and sustainability

What’s the difference between ESG and sustainability? The last thing you want is to discover you don’t know the answer in the middle of a board meeting. 

Corporate decision-making today involves much talk around ESG and sustainability – precisely, how your company will fit into both movements. 

While they share a lot of overlapping principles, they are different, and it’s essential to get that difference right in your head now because once you sit down with colleagues to oversee core strategic decisions, you must be clear on what you’re talking about.

Sustainability is a principle dictating that we should look after our own needs without risking the needs of future generations. It’s so broad that it inevitably means different things in different boardrooms. But the common thread is that it guides stakeholder expectations and, as a result, company strategy. 

ESG isn’t a principle; it’s a framework for measuring specific impacts and risks – a tool for investors to know where their money is going.

They do overlap, and they’re both so broad that it’s easy to get lost in one or the other and eventually consider them both under the same heading. 

The three letters in ESG stand for environment, social and governance. In practice, companies embracing ESG will often commit to not harming the planet (environment), its people (social) or themselves (governance). 

While this should always be within the context of ESG as an investment metric and a tool to analyse risk, it’s easy to generalise to the point of considering ESG as a metric of sustainability or simply another name for sustainability itself. 

This is particularly true when companies focus on the “E” part of ESG. It’s popular across multiple industries and wins the backing of key stakeholder groups, and its focus on the environment creates a natural overlap with sustainability activities.

If you are in a board meeting and find yourself hovering around both topics, be sure not to hint that they’re the same thing with these tips:

• ESG is a collection of metrics; sustainability is a principle.
• If you’re talking about ESG, you will likely end up talking about numbers, quantities, reporting and investment opportunities. If you’re talking about sustainability, it’s expected more in the context of what kind of company you want to be. 
• Sustainability, in many respects, is the end goal. ESG is a pathway and a framework that will allow you to get there.