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ESG Trivia: ESG vs. Sustainability: Understanding the nuances

Date of issue: 2023-12-01

The terms "ESG" and "sustainability" are frequently mentioned together and often used interchangeably, yet they embody subtly different concepts.

The United Nations defines sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” In other words, sustainability focuses on the impact of individuals and businesses on the world, aiming to preserve the viability of environmental, social, and economic systems. It raises questions like: How do business and investment decisions affect our society and environment’s sustainable development? Do these decisions lead to greenhouse gas emissions that exceed planetary boundaries, and do they contribute to a just society? Sustainability hinges on creating systemic value, flourishing within a market that supports robust economic and financial stability.

In contrast, ESG (Environmental, Social, and Governance) zeroes in on the risks and opportunities presented by environmental, social, and governance factors to businesses and investors, particularly in terms of their financial implications. It ensures that businesses and investments yield sustainable long-term financial returns. Companies and investors may evaluate the risks, reputation impacts and new opportunities that issues like climate change, community engagement and the treatment of employees could pose to a business or investment portfolio. While system sustainability may result as a secondary benefit, but not the primary focus.

James Chan,
Co-founder, PIE Strategy


The above ESG Trivia is provided by PIE Strategy, the Knowledge & Strategy Partner of the Caring Company Scheme.