What is the difference between ESG and Sustainability?

Updated Jan. 19, 2023

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The three important distinctions between ESG and Sustainability simply explained.

ESG stands for Environment, Social, Governance, and was a framework developed by the finance industry to help incorporate ESG data into investment decision making.

Its primary purpose is to get more disclosure on an organization’s environmental, social and governance indicators which means that it’s very useful for ‘best-in-class’ company comparisons.

In comparison, the Sustainability of an organization can be explained as meeting today’s needs without taking away from future generations, others, or the environment.

The Sustainable Development Goals (SDGs) established by the United Nations align with Sustainability more than ESG does.

SDGs focus on how a company’s products and services, as well as its operations, can help meet environmental and social needs.

These societal needs include food, energy, water and health etc. Environmental needs consist of reducing the impact on resources or the environment (i.e., pollution).

ESG versus Sustainability

The 3 key differences are:

  1. ESG focuses on disclosure and governance, which has always been part of finance whilst Sustainability focuses on the impact of products, services and operations and their effect on the environment and social equity.
  2. ESG was developed by the finance industry versus Sustainability which was developed by the United Nations.
  3. ESG scores can involve hundreds of data points including policies which may or may not be implemented by companies whereas Sustainability is measured by focusing on 5 key factors. (Read more about these factors and how Sustainability is measured here).

To order an independent SDG Analytics report from Sustainable Platform which shows the sustainability assessment of your company, type the company name into the find page here and click Purchase SDG Analytics.

Sustainability metrics for most companies can be found on Sustainable Platform’s website. Example ESG scores can be found for some companies by viewing MSCI, ISS or Sustainalytics websites.

Example sustainability impact metrics can be found by visiting the Impact Calculators for two of Australia’s leading funds, the Nanuk New World Fund and CFS’ Thrive+ fund.

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