In business, ESG is often used synonymously with sustainability. When investors, banks, legislators, or companies talk about sustainability, they often say „ESG“ and, conversely, when they speak about ESG, they mean sustainability. The combination of environmental, social, and governance (ESG) aspects equals sustainability for them.
However, in this concept, the economic aspects of sustainability are being overlooked. This distinguishes the ESG view from the classic definition of sustainability, which is seen as the interplay of environmental, social, and economic (ESE) factors. Therefore, institutions that manage ESG are only managing sustainability if they also consider the economic perspective within their sustainability management. Usually, companies tend to place a strong focus on the economic perspective of their business activities. They are required to produce value-add in the form of profitability and often provide numerous positive economic impacts for society. To be able to holistically manage sustainability, the economic dimension of sustainability must be reflected in the discussion in the same way as the social and environmental aspects.
So, how do you manage sustainability? This is where the „G“ (Governance) is the key connecting element. Governance makes it possible to meaningfully address conflicting goals and link value-added activities in business with relevant impact issues.
To holistically manage sustainability, we must embrace ‚ESE with G‘ – the interplay of environmental, social, and economic dimensions governed by a framework that balances conflicting goals. It’s not a new invention, but a way to align value-driven business decisions with the broader transition toward a Green Economy.
Sustainability Management by using “ESE with G”
Many institutions manage ESG and the economic dimension highly professionally – but separately. The difference with the integrated view on “ESE with G” is that, on the one hand, you can more easily acknowledge conflicting goals and identify potential win-wins between the economic and environmental or social dimensions. On the other hand, you can include economic aspects such as turnover and profitability, as well as reputation and business relationships, into the equation without remorse.
With managing by ESE with G, all dimensions have their say when we are confronted by conflicting goals: generating positive environmental or social impact is, of course, favorable and should be seen as such. However, supporting such goals could massively impair other goals, e.g., the economic dimension. In this case, those conflicts need to be analyzed to compare potential win-lose scenarios and how they could be mitigated. This is what governance is there for. In short, it’s about maintaining a balance between the objectives through governance – sustainability is ESE with G! We have to acknowledge that there will be no perfect situation where all dimensions‘ goals are fulfilled completely.
This is how SMEs and many other companies have always been successful for ages, even if they have often perceived this as standard business practice rather than sustainability management. It’s not an invention, just a new way of thinking. “ESE with G” is a concept that can support a more balanced and hopefully more objective and data-driven discussion about how we can generate the best decisions in businesses – and manage the necessary transition towards the Green Economy.
Further authors: Dr. Patrick Greß & Jona Nelson
