Flag produced its first Environmental report just over 25 years ago; since then, the landscape of sustainability has changed dramatically. Today, environmental, social and governance (ESG) is an increasingly important aspect of corporate accountability and a guide for how businesses should approach strategic, responsible decision-making.

The foundations for modern ESG

While ESG may feel relatively new, its roots are traceable to the mid-1900s when companies began acknowledging their obligations to stakeholders beyond profitability. Known initially as corporate social responsibility (CSR), this early focus centred primarily on philanthropic endeavours.

In the late 1980s, the growing frequency of natural and man-made disasters – from heatwaves and oil spills to the Chernobyl nuclear disaster – fuelled increased stakeholder calls for corporate accountability. In response, some early adopters started to integrate environmental considerations into their business models. From there, environmental awareness continued to grow, with climate change emerging as the leading global issue at the turn of the century.

A diversifying ESG landscape

With a growing stakeholder understanding of pressing social and environmental issues – including recognition of the impact these can have on financial performance – has come a need for more robust sustainability reporting. And as calls for transparent, technical and comprehensive disclosure have amplified, the number of frameworks designed to lead that disclosure has expanded too.

For example, back in 2002, Flag produced our first ever Global Reporting Initiative (GRI)-aligned report for an automotive company. Two decades later, a recent report we produced for another automotive company was accompanied by disclosures against not one but six leading frameworks:

• GRI
• Sustainability Accounting Standards Board (SASB)
• UN Sustainable Development Goals (SDGs)
• Taskforce on Climate-related Financial Disclosures (TCFD)
• Corporate Human Rights Benchmark (CHRB)
• Global Platform for Sustainable Natural Rubber (GPSNR)

The need for transparency

At Flag, we have witnessed firsthand the growing stakeholder interest in ESG disclosure. At the same time, we know the pressures companies are under to avoid the pitfalls of green and social washing when seeking to establish their sustainability position – no matter how mature their strategy and reporting are.

With proliferating regional and national directives and regulations around substantiating social and environmental claims, we realise it can be daunting to navigate the disclosure landscape. To help demystify the process and guide organisations towards more accurate and transparent reporting, our ESG experts have created a series of focused guides, including on how to avoid greenwashing and understanding new regulations such as TNFD.

ESG’s next steps

Sustainability isn’t just about mitigating negative impacts. It’s also about maximising opportunities for innovation and growth by embedding ESG considerations into every facet of business strategies. With the advent of new, global frameworks like the IFRS Sustainability Disclosure Standards, a lot has changed in our industry over the last 25 years. The next 25 promise to be just as dynamic, and I am excited to be part of the change.