The business sector is evolving, whether on its own or under pressure from government agencies. The environmental, social, and corporate governance sector has been through several changes in the past few years as diversity and the environment come to the fore. Several factors have been cited as bringing the ESG sector back to prominence in 2021, including the election of President Joe Biden. The decision to return the U.S. to the Paris Agreement has renewed the focus on ESG as a factor in the sector’s growth.
There are several reasons why the latest dominance of the ESG sector has become a driving force behind changes to the business world. ESG has become a significant part of the new direction being taken by the European Union. The E.U. is a driving force behind the changes to the diversity and banking transparency seen in the last two decades. The latest directives from Brussels are focusing on creating a transparent business sector when it comes to human rights and financial matters.
The emergence of President Biden in the U.S. has created a different way of pushing forward the demands of ESG in the 21st-century. The adage from Milton Friedman that business should only be concerned with profits no longer rings true. The stock market understands human rights, financial transparency, and environmental issues can significantly limit business growth. In the U.S., Wall Street is changing course to allow its members to come into line with the demands of modern-day investors. The Trump Administration had limited the powers of companies and investment funds to take ESG into account when making financial decisions. The Biden Administration has changed tack and will allow ESG reports to be produced to help expand its reach.
The changing ESG landscape is on the horizon, and business leaders would be wise to expand their reach into new areas of ESG. The sector is growing and allows the development of directives to protect companies from scandals based on their lack of transparency. Starting with a report on the ESG position of a business will enable its leaders to position their company for the future. By identifying potential problem areas, the path forward will be more accessible when Government agencies become involved.