ESG Metaverse: gap exists between corporate fantasy and real challenges
ESG. These three letters, which stand for environmental, social and corporate governance, have gone viral in the media and on social networks, while also winning over the corporate and academia worlds. However, far from leading to a radical change in corporate stance regarding the social and environmental challenges of our times, the popularization of this term has given rise to a parallel universe, in which ESG is presented as a great novelty, offering solutions to all problems and exaggerating the progress made. This is the argument set out in an article titled “The ESG Metaverse,” published in the latest issue of GV-Executive.
The authors, Mario Monzoni and Fernanda Carreira of the Center for Sustainability Studies (FGVCes) at Fundação Getulio Vargas’ Sao Paulo School of Business Administration, write that although there have been advances in corporate strategies and practices to promote sustainability, there is a gap between ESG-related promises and the real situation.
The reality of ESG
This parallel universe, which the authors call the “ESG Metaverse,” shows that there are far more complex issues and necessary actions than the ones that are being publicized by the corporate world. Social and environmental challenges will not disappear overnight and, in order for ESG to truly represent a major step forward, it must address current issues based on an “ecological economy,” which goes beyond the incorporation of social and environmental topics into business practices. It is a paradigm shift and a new logic for doing business. However, when we look at reality, we can see that Brazilians are increasingly skeptical in relation to companies’ commitments to sustainability practices.
“Some companies have created imaginary worlds and are living in a Metaverse. They publish their reports about ESG practices for investors to read, giving the impression that all the problems have been solved, or at least that they have done their homework,” Monzoni and Carreira argue.
New development or déjà vu?
The researchers point out that the concepts inherent to ESG go back some time, as companies have long been looking for more responsible business practices. In the past, this was called “corporate sustainability” or “corporate social responsibility.” “ESG is therefore not a new development but builds on a preexisting movement and an accumulation of understandings about the relationship between natural and social (including economic) processes, with solid roots in science,” they write.
ESG differs from previous movements because of its large dimensions and reach. “The fact is that this is just the first phase in a small expansion of awareness about global sustainability challenges. To move on to the next phases, we need to remind ourselves of where and when this wave was formed and to propose critical reflection so that ESG becomes a reality and not a shared fantasy or new narrative,” the authors add.
Challenges and prospects
According to the authors, business logic based on the concept of ESG ought to encompass four aspects:
- - Understanding of the economy as a subsystem of society, which in turn is a subsystem of the environment;
- - Companies’ involvement in the country’s social problems;
- - Questions about consumption and economic growth as synonyms for development;
- - Openness to alternative business models.
Regardless of ESG’s ideals, there is still a long way to go.
“The fact is that we are only in phase I of a little game involving a slight expansion of consciousness about the global challenges of sustainability. To move on to the next ones, we need to remind ourselves of where and when this wave was formed and to propose critical reflection so that ESG becomes a reality and not a shared fantasy or new narrative. Income inequality, poverty, lack of sanitation infrastructure and environmental issues are some of the urgent challenges that need to be addressed. Without concrete advances in these areas, among others, we will be living in the ESG Metaverse and not in the reality that surrounds us,” the authors say.
To see the complete article, click here.