EESG is Much Better Than ESG. Here is Why

ESG, representing environmental, social, and governance factors, has emerged as a crucial framework guiding corporate sustainability strategies. However, while ESG has been instrumental in promoting responsible business practices, a new paradigm shift is underway with the introduction of EESG (environmental, economic, social, and governance) criteria. Unlike its predecessor, EESG integrates economics into the traditional ESG framework, recognizing the pivotal role of economic considerations in sustainability initiatives. This innovative approach acknowledges that sustainable practices must align with economic viability to ensure long-term success. EESG is much better than ESG because it emphasizes a holistic understanding of sustainability, where economic factors are given equal importance alongside environmental, social, and governance aspects. By integrating economics into the sustainability discourse, EESG aims to foster a more balanced and comprehensive approach to corporate sustainability, addressing the inherent tensions between financial objectives and sustainability goals. Hence, this NUS Bizbeat article emphasizes EESG and why that has come through as important for businesses.

According to the article, ESG, standing for environmental, social, and governance criteria, has become a significant framework in corporate sustainability, dating back to its inception in 2004. However, the article suggests that ESG, while valuable, overlooks a critical aspect: economics. The integration of economics into ESG, proposed as “EESG,” is deemed essential for a comprehensive understanding of sustainability and why EESG is much better than ESG. Recent business episodes, like ExxonMobil’s resistance to climate resolutions, underscore the economic imperative in sustainability efforts. The tension between economics and ESG is evident, with shareholders prioritizing financial returns over sustainability goals.

This tension is further highlighted by BlackRock’s cautious stance on ESG terminology. Nevertheless, academic research indicates a positive correlation between sustainability and business performance, with studies revealing improved financial performance and lower costs of capital for companies with higher ESG ratings. However, complexities arise in specific sectors, such as the palm oil industry, where greater ESG transparency correlates with poorer firm valuation. The article advocates for the integration of economics into ESG to foster a more holistic approach to sustainability, emphasizing that sustainability efforts must align with economic viability for long-term success.

“EESG is much better than ESG” is a big statement. EESG is becoming the new trend in the corporate world. Read through the preceding text to get to know what ESG was missing to be replaced with EESG.