“What is driving this ESG movement? A mandate of sorts.”
So begins an article published in CPA Journal. The article, which graced the cover of the journal, was co-written by Lubin Clinical Professor and Executive Director of the Lubin Center for Sustainable Business Steven Mezzio, PhD; CEO of ESG Lynk Alejandra Veltmann; José Ignacio Morejon, executive director of Ecuador-based Sistema B; and Pace alumnus and Greyston CEO Joseph Kenner ’02.
A case in point is recent actions by the US Securities and Exchange Commission (SEC) demonstrating a commitment to greater transparency in ESG impacts by issuers. For example, the SEC recently proposed to enhance disclosures by certain investment advisors and investment companies about ESG investment practices.
As Mezzio explains, ESG pertains to an integrated purpose—or the focus on a triple-bottom-line of people, planet, and profits. “While businesses have historically focused on a singular bottom line—profits—the ESG movement posits that in addition to profit, businesses could equally focus on people and the planet,” he says. In his model, the planet and the people who inhabit it are represented by the E(nvironmental) and S(ocial) in ESG, respectively. Meaning, businesses should contribute to environmental stewardship in a meaningful way and has a social responsibility to all of its stakeholders—from employees, to customers, to investors.
Growing numbers of small and medium-sized enterprises (SME), spanning a range of sectors and geographies are signaling their commitment to an ESG-rooted integrated purpose. According to the article published in the CPA Journal, small and medium-sized enterprises (SMEs) are playing a crucial and unique role in this international ESG movement. SMEs make up approximately 90% of businesses and more than 50% of employment worldwide, they play a critical role in the impact of the international ESG movement.
While larger companies generally have the bandwidth and resources to support and embark on a wide range of ESG-related initiatives, this is not often the case. “SMEs are not as fruitful in terms of resources they can devote,” said Mezzio. “We thought we’d take a step back and think about how they can still proceed down this path with their inherent limitations with SMEs. Whether this is establishing proper benchmarks or reporting metrics, it’s also essential to be upfront with shareholders and stakeholders about company initiatives.”
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