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The adoption of ESG is rapidly increasing, and criticism of ESG is increasing as well. ESG — stands for Environment, Society and Governance– A framework used to assess a company's impact on society and the environment, helping investors and stakeholders assess a company's sustainability and ethical practices.
As global awareness of sustainability and responsible business practices continues to grow, ESG has become a vital tool for assessing companies' compliance with ethics, human capital, and environmental considerations. At the same time, we are laying the foundation for companies to go beyond marketing and achieve sustainability.
As of February 2024, over 90% of S&P 500 companies Report on ESG, showing that the adoption of that lesson is not just a trend. Investors, from institutional investors to individual shareholders, are increasingly considering ESG criteria when choosing investments. Although ESG investments increased significantly in 2021 and 2022, a downward trend was observed in 2023 as criticism of the framework continued to rise. Critics argue that a lack of standards, regulatory requirements and incomplete data collection are holding companies back from measuring and achieving gender equality.
The potential of ESG to effectively support women
Numerous studies show that having women in executive positions and increasing overall diversity improves an organization's profitability (S&P Companies win when women become leaders and McKinsey's Triumph of diversity,Such). Corporate boards are becoming more gender diverse, said Luisa Palacios, a senior fellow at Columbia University's Center on Global Energy Policy. A low-cost solution to achieving global standards. However, companies continue to miss opportunities to drive gender-transformative behavior that can be leveraged through ESG metrics.
Investors are becoming more aware of the importance of gender diversity and equity in determining risks and opportunities. However, women continue to be underrepresented in many fields. for example, their proportion will be smaller More than 20% of senior leadership positions in energy companies and 17% of chief information security officer roles in cybersecurity are examples of the need to consider gender imbalances in hiring, training, and promotion.
As ESG requirements increase, private companies stand to benefit from progressive measures that support the entry, retention, and leadership of women in the workplace. Women are continually underrepresented in the private sector, and the evidence shows that. , currently 7.3%. Therefore, equal pay, training opportunities, mentorship, the provision of sexual harassment prevention workshops, investment in scholarships and funding opportunities to access her STEM education will help women succeed in male-dominated fields. It is an effective means to help you.
the government better reaction Addressing gender diversity requirements: The UK requires organizations to report on gender pay gaps, while California law requires some listed companies to have female directors on their boards. By openly reporting gender pay, investors, governments and civil society can hold companies accountable to ESG standards and encourage equal pay. There are also initiatives to help bridge the private and public sectors to achieve gender equality. gender parity accelerator. This national collaboration platform brings together ministers and CEOs to advance women's workforce participation, pay equity, and leadership. Nine countries in Latin America are working on this initiative by creating gender recognition programs for businesses.
Regulators and policymakers should encourage the private sector to engage in voluntary and mandatory ESG indicators on gender-related issues. There are already examples of how companies can help measure their gender equality efforts. The Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the United Nations through the UN Global Compact and UN Women, and Bloomberg recommend metrics that measure corporate performance specific to women in the workforce. Masu.
Lack of unified methodology
Despite the availability of metrics to improve gender equality in the workforce, such standards are not widely adopted and are often used by investors to make decisions. . While there are regulations for reporting Equal Employment Opportunity (EEO) data in the United States and gender pay gap data in the United Kingdom, regulatory requirements for human capital are significantly smaller in number and definition than environmental disclosure requirements. It's limited in both respects. This reinforces the need for policy development and targeted government intervention to adapt standards to regulatory frameworks and legislation in a commitment to gender equality. No country has achieved full gender equalityHowever, some of the companies leading this race had government incentives to introduce metrics into their regulations.
Additionally, wide interpretations of the standards and lack of a unified methodology have led to significant criticism of ESG. Investigating the reasons for the downward trend in ESG investing shows that it is not due to a lack of importance, but rather to the broad interpretation of the criteria and the total number of criteria. Unless more detailed guidance is provided on these metrics, widespread adoption and comparison will be difficult.
Despite advances in human capital systems and data collection, many companies lack robustness in collecting human capital data compared to financial data. Most S&P 500 companies report both environmental and human capital metrics, but only a few guarantee the same level of reliability and accuracy. Inadequate gender-related data collection within organizations hinders the disclosure of gender-related indicators. Robust data collection mechanisms are essential to obtain accurate gender-related information.
Implementation remains difficult and organizational leaders need to recognize that gender equality is key to their work as part of the UN 2030 Agenda through Sustainable Development Goal 5. At the current pace, it will take 286 years to close the gender gap, or 140 years. To achieve equal representation in workplace leadership. Business leaders will have to choose between maintaining the status quo or leading transformative efforts to make the planet more just and inclusive. This starts with robust data collection and reporting, along with efforts to increase gender equality.
The views and opinions expressed herein are those of the authors and do not necessarily reflect the official position of Columbia Climate School, Earth Institute, or Columbia University.