ESG is not a new concept. It first emerged in 2004 and was formally included in a United Nations report in 2005.

In 2006, with the support of the United Nations Environment Programme (UNEP) and the United Nations Global Compact (UNGC), the United Nations Principles for Responsible Investment (UNPRI) was established. This marked the official introduction of the ESG investment philosophy, paving the way for ESG to enter the global economic stage.

Nearly two decades since its inception, ESG has grown into a trillion-dollar industry. The concept has gained significant traction in China, particularly following the announcement of the nation's "2030 Carbon Peak" and "2060 Carbon Neutrality" goals.

Let's start by understanding the concept of ESG. ESG stands for environmental, social, and governance, which form the concept's three key factors. Initially popular in investment circles, it has been referred to as a company's "second financial statement."

The Three Pillars of ESG:

E: Environmental

This is the most widely recognised pillar, encompassing all aspects related to environmental

protection, including energy usage, environmental awareness, and biodiversity conservation.

S: Social

This pillar focuses on the interaction between businesses and society, assessing whether companies fulfil their social responsibilities towards people and the community.

G: Governance

This pillar examines corporate governance practices, aiming to make operational processes more transparent, efficient, and fair. Key indicators include management systems, board structure, issues like corruption and bribery, and information disclosure.

ESG is not only about being accountable to shareholders; it also focuses on factors that influence a company's long-term development. In this sense, ESG ratings help bridge the information gap between investors and companies, enabling investors to identify potential risks that are hard to quantify.

As regulatory bodies reach a consensus on ESG, stock exchanges around the world have begun to require mandatory disclosure of ESG-related information. In China, the A-share market is currently transitioning from voluntary to mandatory disclosure. Meanwhile, regions such as Hong Kong, Singapore, Indonesia, and the European Union have already implemented compulsory ESG disclosure frameworks. By 2023, almost 1,800 A-share listed companies in China had released ESG-related reports independently, with a disclosure rate exceeding 35%.

Today, ESG has evolved to become more than just an investment concept. With societal progress, it has grown into an evaluation system capable of influencing corporate valuations. ESG has entered a new phase of rapid growth, and now incorporates principles such as environmental protection, carbon neutrality, social responsibility, employee rights, organisational governance, and sustainable development.

The rise of ESG is an inevitable result of historical and societal developments.

Firstly, companies do not exist in isolation. By definition, they are profit-oriented organisations formed to meet the needs of socialised production in a market economy. They are therefore constantly interconnected with the natural and social environments in which they operate. With the increasing frequency of extreme weather events and the growing impact of environmental and social factors, concepts like low-carbon initiatives and human-centric care have become even more important. In some cases, they may even have a decisive impact on a company's business operations.

After all, “altruism” forms the foundation of a company's long-term commercial strategy. In this context, “altruism” has transcended the mere act of serving customers to encompass various other factors critical to a company's survival and growth.

From an environmental perspective, ESG raises awareness of key issues like extreme weather and energy pollution, encouraging companies to adopt more effective countermeasures.

In terms of social and governance aspects, ESG helps businesses treat employees, shareholders, and all stakeholders fairly and avoid unethical practices. It also pushes companies to innovate continually in order to ensure low-carbon and sustainable development. In the long term, this not only reduces costs but also unlocks new possibilities, creating more job opportunities.

From a consumer standpoint, a report by McKinsey & Co. revealed that 60% of millennials are willing to spend more on brands committed to corporate social responsibility. In addition, Kotler Marketing Group highlighted that consumers value brands’ involvement in charitable causes and want to see the social values and issues behind these brands' actions.

From these perspectives, ESG not only aligns with the balance between corporate economic benefits and environmental and social considerations, but also resonates with the principles advocated by consumers, investors, and governments. It is undoubtedly deserving of greater attention from companies.

ESG is increasingly attracting the attention of leading global companies. Many major Chinese corporations, including top IT firms, have also intensified their efforts in ESG reporting. Recognising the importance of ESG communication, business leaders have introduced ESG marketing initiatives, which, in turn, can enhance corporate reputation and significantly improve brand perception.

From a marketing perspective, a company's core short-term competitiveness may stem from the quality of its products and services. However, in the long term, it is undoubtedly derived from the company's brand and social value.

The significance of ESG communication, therefore, cannot be overstated. Corporate culture has never been as transparent and crucial as it is today, with leaders, investors, employees, and consumers all seeking alignment with companies that share their values. Millennials, in particular, are seen as pivotal to this shift. Their purchasing power and ability to advocate for brands enable ESG-related messaging to reach a wider range of stakeholders.

In the coming years, as consumers increasingly favour brands that embrace low-carbon practices, sustainable development, and social responsibility, companies that prioritise corporate social responsibility and achieve societal recognition for their ESG communication will be more likely to stand out as leaders in their industries.