Have we ever imagined how a company can continue to grow while minimizing its negative impact on the environment and society? This question is even more relevant today, when issues such as climate change, social injustice, and corporate governance crisis are staring us in the face. One answer is to implement the principles of Environmental, Social, Governance (ESG).
ESG is not just a modern management concept, but a set of non-financial indicators that assess how companies manage their environmental impact, treat society, and maintain effective internal governance (Melinda and Wardhani, 2020). This concept emerged in response to the growing global awareness of the importance of sustainable development. By implementing ESG, companies not only strengthen public trust but also enhance their long-term competitiveness.
Three Pillars of ESG
1. Environmental
This pillar is the most recognizable aspect because it is directly related to nature. Companies are required to reduce carbon emissions, switch to renewable energy, conserve energy, and manage waste responsibly. For example, a factory that uses solar panels not only reduces electricity operating costs but also reduces its carbon footprint.
As an environmental consultant focused on natural resource management, Bhumi Pasa Hijau plays a role in assisting companies in realizing the environmental pillar towards sustainable business practices. This assistance is realized through various initiatives, such as developing carbon emission reduction strategies, planning for renewable energy transition, energy efficiency, and integrated waste management. With this approach, the implementation of sustainability does not stop at the level of discourse or symbolism, but actually has a real impact on companies and the environment.
2. Social
Sustainability is not simply about environmental aspects; it must also consider social dimensions. The social pillar emphasizes how companies engage with their stakeholders, ranging from employees to local communities. For example, companies that are committed to workplace safety, or that provide training to communities so they can access new economic opportunities. Although these social contributions are not always directly reflected in financial reports, they have a huge impact on employee loyalty, the welfare of surrounding communities, and the company’s reputation.
3. Governance
The governance pillar is the foundation that ensures environmental and social commitments are consistently implemented. Good governance means that company decisions are made in a transparent, accountable, and ethical manner. Examples include financial transparency, anti-corruption policies, and protection mechanisms for minority shareholders. Without strong governance, commitments to environmental and social aspects risk becoming mere statements without real implementation.
Why is ESG Important?
The implementation of ESG is not just a matter of compliance. For companies, ESG helps anticipate risks, strengthen reputation, and attract investors who focus on sustainability. Operational efficiency also improves when energy is more efficient and waste is managed properly.
For society, ESG opens up more opportunities for social justice, better occupational health, and healthier relationships between companies and surrounding communities. For the environment, ESG means tangible steps to protect ecosystems, wise natural resource management, reducing pollution, and supporting the transition to clean energy.
ESG is not just a trend, but a foundation for businesses to survive and grow. By balancing profit, people, and the planet, companies are not only relevant today, but also prepared to face a future that is fair, healthy, and sustainable.
ESG Framework
In order to support the implementation of targeted ESG, the government and related institutions have formulated an ESG framework as a guideline. This framework not only strengthens transparency and accountability, but also encourages companies to align their contributions with the national sustainable development agenda.
The ESG framework is a set of principles or standards used to manage businesses and business processes in accordance with certain criteria, while also providing a positive impact on environmental, social, and governance aspects. The ESG standards formulated by the Ministry of Finance of the Republic of Indonesia are as follows.
- Pollution Prevention and Waste Management
- Biodiversity Conservation
- Natural Resource Management and Energy Efficiency
- Climate Change Mitigation and Adaptation and Disaster Risk
- Employment and Work Environment
- Diversity, Equality, Inclusion, and Access
- Social Interests
- Cultural Heritage
- Leadership and Governance
- Risk and Control
ESG is now evolving into a new standard that not only focuses on transparency and accountability, but also serves as a compass for companies in facing sustainability challenges. By implementing the ESG framework, companies can build credibility, respond to stakeholder expectations, and ensure that their business direction remains aligned with sustainable development goals.
ESG is now evolving into a new standard that not only focuses on transparency and accountability, but also serves as a compass for companies in facing sustainability challenges. By implementing the ESG framework, companies can build credibility, respond to stakeholder expectations, and ensure that their business direction remains aligned with sustainable development goals.
Source:
Hariyanto DB, Ghozali I. (2024). Pengaruh Environment, Social, Governance (ESG) Disclosure terhadap nilai Perusahaan. Diponegoro Journal of Accounting. 13(3): 1-13. ISSN: 2337-3806.
Kementerian Keuangan Republik Indonesia. (2022). Kerangka Kerja Lingkungan, Sosial, dan Tata Kelola (LST) pada Dukungan dan Fasilitas Pemerintah untuk Pembiayaan Infrastruktur. Direktorat Jendral Pengelolaan Pembiayaan dan Risiko, Kementrian Keuangan, Republik Indonesia.
Melinda A., Wardhani R. (2020). The Effect Of Environmental, Social, Governance, And Controversies On Firms’ Value : Avidence From Asia. In International Symposia in Economic Theory and Econometrics. Emerald Publishing. 27: 147-173.
