The Rise of ESG: Is Corporate Social Responsibility the Future of Business?

12th May 2021

Environmental, Social, and Governance (ESG) factors are gaining prominence in corporate decision-making. This article explores the growing trend and its economic implications in 2021.

In recent years, Environmental, Social, and Governance (ESG) considerations have emerged as central to business strategy, and 2021 marks a critical juncture in the development of this trend. Companies, investors, and consumers alike are increasingly prioritising social responsibility alongside financial performance. The question now being asked is: could ESG become the new standard for corporate success, or will it fade as just another passing trend?

ESG factors broadly refer to a company’s performance in three key areas: its impact on the environment, the way it treats employees and communities, and how it operates in terms of governance and ethical standards. Although the focus on corporate social responsibility (CSR) is not new, the growing integration of ESG factors into business decision-making is a reflection of broader societal shifts. Consumers, especially millennials and Gen Z, are demanding that companies do more than just generate profits—they expect businesses to contribute positively to society, support environmental sustainability, and adhere to ethical governance practices.

The rise of ESG can be traced to the growing awareness of global issues such as climate change, social inequality, and corporate corruption. In 2021, companies are under increasing pressure from all sides: governments are introducing stricter environmental regulations, activists are pushing for greater accountability, and consumers are using their purchasing power to reward socially responsible companies. Investors, too, are beginning to recognise the long-term benefits of incorporating ESG factors into their portfolios, with studies showing that companies with strong ESG practices tend to perform better over time.

One of the most prominent drivers of the ESG movement is the increasing recognition that sustainability is not just about being environmentally friendly—it is also about ensuring long-term economic viability. The traditional view that businesses should prioritise profit above all else is being challenged by the realisation that focusing on the long-term health of both the planet and society can be equally lucrative. By addressing environmental concerns, such as reducing carbon emissions or minimising waste, companies can lower costs, improve efficiency, and tap into new markets. Similarly, prioritising social and governance issues, such as employee well-being, diversity, and transparency, can enhance reputation, foster customer loyalty, and attract top talent.

The economic implications of ESG are profound. For businesses, adopting ESG practices can open up new revenue streams. Renewable energy, green technology, and sustainable products are all growing sectors, and companies that invest in these areas are positioning themselves for future growth. In addition, ESG-conscious consumers are willing to pay a premium for products that align with their values. From an investment perspective, ESG has become a key factor in portfolio construction. ESG-focused funds have gained popularity, and institutional investors are increasingly demanding that the companies they invest in meet certain sustainability criteria.

Despite the undeniable growth of the ESG movement, there are those who remain sceptical.

Critics argue that the rise of ESG is nothing more than a marketing gimmick—a way for companies to boost their image without making any real changes. They point to instances where companies have made superficial commitments to sustainability or social justice, only to continue business as usual behind the scenes. Furthermore, some argue that ESG factors are subjective and difficult to measure, making it hard for investors to accurately assess a company’s true performance in these areas.

There is also the question of whether ESG practices truly lead to better financial performance. While many studies suggest a positive correlation between strong ESG performance and long-term financial success, the evidence is not yet conclusive. Some companies have thrived without adopting ESG practices, while others have struggled despite their efforts to become more sustainable. Additionally, ESG criteria can be challenging to standardise across industries and regions, making it difficult for investors to compare companies on a like-for-like basis. For some, the fear is that ESG will ultimately become a compliance exercise, with companies ticking boxes rather than implementing meaningful change.

Nonetheless, the momentum behind ESG is undeniable, and it is clear that companies cannot afford to ignore these issues in 2021 and beyond. The integration of ESG factors into business strategy is no longer a mere trend—it is a reflection of the evolving expectations of stakeholders, from consumers to investors to regulators. In many ways, the rise of ESG represents a return to the idea that business exists not just to generate profits but to serve a broader societal purpose. As such, the corporate world may be on the cusp of a fundamental shift, one where profitability and social responsibility go hand in hand.

This shift is reminiscent of the transformation depicted in the works of Charles Dickens. In novels such as A Christmas Carol, Dickens critiques the greed and moral indifference of Victorian society, highlighting the consequences of neglecting social responsibility in favour of personal profit. The character of Ebenezer Scrooge, whose journey towards redemption is marked by a realisation that wealth should be used to benefit others, reflects the potential for businesses to evolve in a similar way. In the 21st century, corporate leaders may need to adopt a more Dickensian perspective—one that recognises the importance of giving back to society and ensuring that their wealth is used to improve the world around them.

Similarly, the rise of ESG can also be viewed through the lens of Shakespeare’s The Merchant of Venice. In this play, the central conflict revolves around the concept of a “pound of flesh,” a legal contract that demands a harsh penalty for defaulting on a loan. The play explores themes of justice, mercy, and the human cost of transactional relationships. In the modern business world, ESG represents an attempt to reconcile profit-making with a sense of moral responsibility. Just as Shylock’s rigid interpretation of contract law ultimately leads to his downfall, companies that prioritise profits without regard for social and environmental consequences may find themselves facing public backlash, regulatory scrutiny, or even financial ruin.

As we move further into the 21st century, it is clear that the traditional model of business—focused solely on maximising profits for shareholders—is being replaced by a more holistic approach. Companies that embrace ESG factors are likely to be better positioned to navigate the complex and interconnected challenges of the modern world. In doing so, they will not only contribute to a more sustainable future but will also secure their own long-term success.

The economic implications of ESG are far-reaching, but they are not without their challenges. Standardising ESG criteria, ensuring transparency, and measuring impact are all hurdles that need to be addressed. Yet, despite these challenges, the rise of ESG signals a fundamental shift in how we understand business success. In a world where stakeholders are increasingly demanding accountability, companies that integrate ESG factors into their strategies are more likely to thrive.

Ultimately, ESG is not just about doing the right thing—it is about recognising that doing the right thing is also good for business. The future of corporate responsibility lies in the ability to balance profit with purpose. As the world continues to grapple with the consequences of climate change, social inequality, and corporate malfeasance, the rise of ESG represents a hopeful sign that businesses can, indeed, be a force for good. Just as in the works of Dickens and Shakespeare, where characters learn to balance ambition with morality, so too must modern corporations find a way to reconcile their financial ambitions with their social and environmental responsibilities. The future of business, it seems, will be defined not just by how much profit a company generates, but by how much good it does for the world.