Tensor Research

What is the difference between Sustainability and ESG?

“Sustainability” sometimes refers to a vague concept of sustainable business practices, but often is used to refer specifically to the United Nations 17 Sustainable Development Goals (SDGs) which were adopted by all UN member states in 2015 as part of the 2030 Agenda for Sustainable Development. Businesses in the private sector are explicitly named (see, for example, UN Global Compact) as being critical participants in this shared agenda.

ESG – Environmental, Social, Governance – refers to categories of specific metrics that are used to set targets and measure progress towards sustainability goals that your organization is pursuing. For example, a relevant Environmental metric that might be tracked in pursuit of SDG #12 (Ensure Sustainable Consumption and Production Patterns) for a hotel chain would be the amount of single use plastics used in amenities such as shampoo bottles etc. According to one source, a single 200-room hotel can generate 30,000 pieces of such plastics in one month. As another example, the percentage of female employees in a company is a Social metric to track towards SDG #5 (Gender Equality), while examples of Governance metrics can relate to board composition, and financial risk (SDG #8 – Economic Growth and Decent Work).

ESG reporting frameworks and standards determine which specific metrics to report on based on what is relevant and material for their industry and business context. While regulators and investors mandate reporting based on specific frameworks and standards, many companies will also use voluntary reporting frameworks to share information to a broader stakeholder audience.