Introduction

ESG (Environmental, Social, and Governance) was not always apriority for companies, but governance scandals like the Enron’s 2001 ¹ gave rise to shareholders' and investors' heavy reliance on good corporate governance before investing in a company. Similarly, due to the over-reaching impact of companies on the environment and economy, Investors now demand strong governance because of the environmental and economic risks companies can pose.

We have all come across common activities of multinationals and companies such as, opening borehole in rural areas, giving grants to SMEs, championing gender equality and reduction of waste conversations. However, companies and investors may adopt ESG labels or talk about sustainability to appeal to consumers or meet regulatory standards, without making substantial changes behind the scenes.
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The term ‘ESG’; Meaning and Scope. What does the buzzword ‘ESG’ really entail?;

Ø E)-Environmental

Relationship with their External Environment: ESG requires companies to develop strategies around environmental factors like climate risk, resource management, and sustainability. Some of those strategies may include paperless policies, use of renewable energy, use of degradable materials, recycling waste, etc.

Ø  (S)-Social

Employees, Customers, and Community: This pillar addresses areas that corporate governance might not, such as diversity, equity, and inclusion (DEI) considerations.

Employees: Ensuring employee rights, well-being, and retention through fair benefits, good culture, labor laws, and a supportive work environment.

Customers: This pillar also seeks to strengthen consumer protection (e.g., data protection laws like NDPA and consumer protection laws like FCCPA), enhancing trust and transparency.

Human Rights & Empowerment: ESG also ensures human rights, gender equality, and inclusive company culture (include actuallaws for - labour laws, human rights laws, etc)

Ø  (G)-Governance

Accountability and Transparency: This aspect of governance goes beyond corporate governance to focus on transparent operations, ethical decision-making, and accountability in all company activities.

The 3 pillars of ESG are distinct and independent of each other, however, together bring a cohesion of ideals leading ultimately to sustainability.

‍THE HISTORICAL OF ESG

The concept of Environmental, Social, and Governance (ESG) criteria has evolved significantly over time, shaping the landscape of corporate sustainability. Let us take a walk through the history of this concept;

‍The Past:

Historically, companies focused primarily on financial performance and environmental or social issues were often treated as secondary or even disregarded in business strategy. However, over the last few decades, there has been an increasing awareness of thelong-term risks and opportunities tied to sustainability.

• The period of early Awareness (1980s–1990s): ESG concepts began gaining traction in the 1980s as a separate phenomenon when environmental and social concerns like pollution, labor rights, and corporate ethics started to become prominent in public discourse. The environmental movement, especially awareness around climate change and waste management, laid the foundation for what would eventually be known as ESG.
• The period of 1990s–2000s: Here, investors began looking out for more than just profitable entities; they sought companies that were responsible stewards of the environment, treated their workers ethically, and maintained sound governance practices. The rise of socially responsible investing (SRI) reflected this shift, although ESG as a formal framework hadn’t fully emerged yet.
• 2010s: ESG investing gained more prominence, with major companies beginning to integrate ESG criteria into their     investment processes. During this period, companies started reporting more on their sustainability efforts, and the development of ESG standards and reporting frameworks, like the Global Reporting Initiative (GRI)² and the Sustainability Accounting Standards Board (SASB) ³, helped formalize how ESG data should be disclosed. We also have the advent of the UN Sustainability Development Goals (SDG) ⁴ which was adopted by UN member states in 2015.

‍The Present:

ESG today has become an integral part of corporate strategy, driven by several factors, including regulatory pressures, consumer demand for ethical business practices, and investor preferences for sustainable companies.

• Integration into Corporate Strategy: Many companies have incorporated ESG factors into their long-term strategies, seeing them as key to their resilience, reputation, and long-term profitability. From reducing carbon footprints to improving diversity and inclusion, ESG has moved from “good-to-have” to a “must-have” for many corporations.
• Regulatory Pressure: Governments worldwide are introducing regulations that mandate greater transparency and accountability for ESG performance. For instance, the EU’s Corporate Sustainability Reporting Directive (CSRD) proposed rules around climate risk disclosures⁵ which has made it difficult for companies to ignore or underreport their ESG efforts. Also, in Nigeria the Climate Change Act 2021 requires companies with a certain employee threshold to make annual reports⁶.
• ESG Data and Ratings: Various ESG rating agencies, like MSCI, Sustainalytics, and others, have sprung up, providing investors and stakeholders with standardized information about companies' ESG performance.
• Consumer and Investor Expectations: Public pressure for businesses to act responsibly has never been higher. Millennials and Gen Z, in particular, have shown that they prefer to support, and work in companies with strong ESG credentials. Investors are increasingly focused on companies that perform well on ESG metrics, with a growing body of research linking strong ESG performance to financial outperformance over the long term.

‍The Way Forward:

Looking ahead, ESG is set to become even more integral to corporate sustainability, with evolving trends and expectations shaping its future:

• Greater Standardization: One major development is the ongoing push toward standardized ESG reporting and metrics. The     International Financial Reporting Standards (IFRS) launched the International Sustainability Standards Board (ISSB)⁷ to provide a global framework for sustainability disclosures. This should help resolve the inconsistencies in ESG reporting and ratings.
• Technological Integration: Technologies like artificial intelligence, blockchain, and data analytics will play a bigger role in the ESG frontispiece. These tools can help companies collect, analyze, and report data more efficiently, while also enabling them to track their progress toward sustainability goals in real-time.
• Net-Zero Commitments and Climate Action: As the urgency of addressing climate change grows, companies will continue to ramp up their commitments to net-zero emissions. We can expect more companies to adopt science-based targets for emissions reductions and integrate climate risk into their financial models.
• Social and Governance Improvements: While environmental factors have often dominated ESG discussions, social issues like labor rights, racial equity, and diversity & inclusion are receiving increasing attention. Corporate governance will also become more important, as issues like board diversity, executive compensation, and shareholder rights continue to evolve.
• Circular Economy: There’s likely to be a greater emphasis on the circular economy—where companies design products and services with sustainability in mind, reducing waste, reusing materials, and shifting away from linear models of production and     consumption.
• Impact Investing: The focus of ESG investing will likely shift towards "impact investing," where investors look not just for financial returns, but for measurable positive environmental or social impacts. This could lead to the growth of investment products that focus specifically on measurable ESG outcomes.

‍Conclusion

With the current happenings in the European world with Diversity, Equality and Inclusion (DEI) and climate programs getting cut, reworking of regulations, etc, case in point was the executive order issued by the POTUS⁸, by virtue of which DEI is no longer a central tenet of employment policy and corporate governance in the US. We also have the big Techs rolling back on diversity promotion e.g. Alphabet (Google’s parent company) was said to have omitted a line stating its commitment to DEI in its annual filing with the USSEC⁹ as many others¹⁰.

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[1] What Was Enron? What Happened and Who Was Responsible

[2] https://www.globalreporting.org/how-to-use-the-gri-standards/gri-standards-english-language/

[3] Download SASB® Standards -SASB

[4] https://sdgs.un.org/2030agenda

[5] https://www.bing.com/ck/a?!&&p=576bbb80b496b148152d47041edcea23c8676bc1e13bc7cbc5bcdce5fa646b54JmltdHM9MTc0MDE4MjQwMA&ptn=3&ver=2&hsh=4&fclid=0a3821b4-9770-6956-2025-353996de6823&psq=sec+climate+risk+disclosures+pdf&u=a1aHR0cHM6Ly93d3cuc2VjLmdvdi9maWxlcy9ydWxlcy9maW5hbC8yMDI0LzMzLTExMjc1LnBkZg&ntb=1

[6] Section 24 of the Climate Change Act 2021

[7] https://www.ifrs.org/groups/international-sustainability-standards-board/

[8] FactSheet: President Donald J. Trump Protects Civil Rights and Merit-BasedOpportunity by Ending Illegal DEI – The White House

[9] https://www.reuters.com/technology/google-scraps-diversity-based-hiring-targets-wsj-reports-2025-02-05/#:~:text=Alphabet's%20annual%20filing%20with%20the,reports%20from%202021%20to%202024.

[10] All The Major Companies And Orgs Dumping Their DEI Programs (Full List)

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