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Which Country is Leading on ESG Strategy?

The global climate emergency has gained the attention of governments and citizens alike, with stark reporting of heatwaves at the polar ice caps and near-irreversible damage to ecosystems elsewhere: a world at tipping point. Close scrutiny is also being placed on industry, as the vasty majority of global pollution can be sourced back to commercial infrastructure. 

Businesses are responding globally, by adopting new measures that recognise their social and environmental responsibilities. These strategies are known as ESG strategies – but some countries are faring better than others with regard to implementation.

What is ESG?

ESG stands for Environmental, Social and Governance, and represents a growing area of area of strategy for global businesses. ESG policies are internal policies relating to the impact a business has both globally and local – in terms of pollution, sustainability and socio-economic factors relating to their workforce.

ESG policymaking has taken a prominent place in business strategy for a number of reasons. Public attitudes to businesses, regarding their impacts on workforce, local population and global environment, have become increasingly affecting to reputation and profits. This has incentivised the drafting of ESG strategy as a transparent approach to achieving a neutral or net-positive footprint societally.

The Importance of Net-Zero

There are also larger incentives afoot, as governments across the world have begun to set ambitious ‘net-zero’ emissions policies in an effort to combat the advancing threat of climate emergency. In the wake of Glasgow’s COP26, more countries are introducing legislation and incentives to reach national carbon neutrality – a common target for many being carbon neutrality by the year 2050. Different governments are leveraging different approaches to achieve this – but which businesses are leading on the ESG front?

Netherlands Taking the Lead

The stock market has been a strong indicator for the success of ESG strategy in business as a whole, with publicly trading companies that have published their sustainability measures outperforming other companies within national markets. Using this as a metric to determine which countries have fared better with regard to ESG policymaking, Netherlands appears to win out amongst developed countries; the Morningstar Sustainability Atlas places the Netherlands’ stock market in first place for sustainability. 

Emerging Economies Struggling

However, ESG strategy is seeing slow and fractious implementation in growing economies, where the cost of adopting sustainable measures is disproportionately higher for many businesses. Where much industry infrastructure in the BRIC economies is built in fossil fuels and pollutive manufacturing processes, the alternatives often represent an existential threat to the very markets they could eventually save.

With developing countries experiencing their own forms of industrial revolution, the onus turns to developed countries to offset the carbon emissions created – resulting in the introduction of ambitious carbon offset programs as part of the package of measures agreed at COP26.

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