What is ESG?
It’s no longer enough for businesses to report record profits or quarterly growth. Today’s customers, investors, and even employees want more. They want purpose. They want values. They want transparency.
And that’s where ESG comes in.
ESG refers to a set of standards used to evaluate a company’s performance beyond just financial metrics, but to the overall footprint of its operations:
Core Principles of ESG
- Environmental: This refers to the environmental responsibility companies have towards the planet. It is about how they manage their carbon emissions, energy consumption, pollution, waste disposal and renewable energy. It is about how environmentally conscious the business is during its day-to-day operations.
- Social: This pillar looks at how a business deals with people such as the workforce, customers, suppliers, and the broader society. Some examples of social topics are discrimination, diversity, and human rights.
- Governance: It’s about the internal mechanics, how decisions are made and who makes them and how they are made accountable. It encompasses leadership accountability, ethical conduct, regulatory compliance, board structure, and protecting shareholder interests.
At its heart, ESG is about accountability, with emphasis not just on the balance sheet, but on the company’s footprints.
Why ESG matters now more than ever
The global shift toward sustainability has accelerated the relevance of ESG. Today, ESG is strategic. Companies that ignore it risk losing investors, customers, talent, and most importantly, public trust. Moreover, regulatory bodies such as SEBI in India and the EU Taxonomy framework are embedding ESG disclosures into corporate reporting norms.
ESG vs CSR: What’s the Difference?
While Corporate Social Responsibility (CSR) and ESG are related, they are not the same. CSR is often about giving back. ESG is about building differently. CSR asks: “What can we donate this year?” ESG asks: “How can we operate better every day?”
The shift is from charity to change. From gestures to governance.
Key ESG Trends in 2025
- Climate Risk Reporting is becoming mandatory across jurisdictions, leading companies to disclose their carbon footprint and transition plans.
- AI and ESG: Companies are leveraging artificial intelligence to track ESG performance in real time, from supply chain audits to sentiment analysis.
- Biodiversity and Circular Economy are gaining traction as environmental focus expands beyond carbon to include resource regeneration and ecosystem protection.
- Social Equity: Issues like gender pay parity, inclusion, and mental health are taking centre stage under the ‘S’ pillar of ESG.
- Green Financing: Banks and investors are offering preferential terms to firms with strong ESG credentials, fuelling capital flow towards sustainable projects.
Challenges in ESG Implementation
Integrating ESG is not without its challenges. Startups struggle with reporting. Mid-size firms fear the cost. Big corporations worry about scrutiny. And across the board, there’s confusion over standards and metrics. However, these are being addressed through better regulatory frameworks, rating agencies, and capacity-building initiatives.
Final Thoughts – ESG is the new baseline
ESG is essential for modern-day businesses. ESG is necessary to build stakeholder trust, make businesses resilient and contribute towards a more equitable world.
Partner with MitKat
MitKat Advisory supports businesses across the ESG lifecycle: from adoption and reporting to assurance, rating advisory, due diligence, and sustainable supply chain integration.