[One Sip of a Book] ESG? Why, What, and How Should We Do It?

Some sentences encapsulate the entire content of the book itself, while others instantly resonate with the reader’s heart, creating a connection with the book. We excerpt and introduce such meaningful sentences from the book. - Editor’s note

The book provides a detailed introduction, diagnosis, and presentation of the impact of the changing phase of ESG management as the ‘chapter’ shifts. It thoroughly explains the ‘essential phase change’ in ESG management, moving from the ‘why’ stage?understanding why ESG must be done?to the ‘what and how’ stage?specifying how it should be done and executing it. The book is composed of five chapters in total. Chapter 1 details the pathways of corporate supply chains emitting carbon that causes global warming and covers related topics such as climate disclosure and strengthened supply chain regulations. Chapter 2 diagnoses the importance of S and G, which have received relatively less attention compared to E, and discusses the roles of employees, consumers, and minority shareholders, as well as new corporate responsibilities that have attracted interest following the recent Ukraine war. Chapter 3 summarizes overseas cases where courts have taken a strong stance on ESG, the full-scale regulation of greenwashing, and issues with ESG rating grades. Chapter 4 provides an in-depth analysis of actual ESG management cases of representative companies that have enhanced mid- to long-term value?Ørsted, Patagonia, and Unilever?while also diagnosing how investment and finance are driving ESG management. The final chapter, Chapter 5, raises issues for the Korean economy from the perspective that ESG ultimately aims for a qualitative and quantitative transformation of the economy, including reforming corporate management focused on quarterly earnings, pursuing sustainable management, and enhancing the long-term value of the national economy.

Among recent S-related issues, diversity and inclusion have become significantly more important. Diversity means, for example, providing women with equal opportunities as men in hiring and board composition. However, if many women are hired but are not given actual authority or responsibility, this is evaluated as weak inclusion. Therefore, inclusion refers to granting women equal authority in actual work. Diversity positively impacts corporate performance. According to a 2019 McKinsey analysis of over 1,000 companies across 15 countries, companies with more than 30% women in management performed 48% better than those with few or no women. The problem is that while 52% responded positively to diversity, 61% gave negative evaluations regarding inclusion. This reveals the issue that women are not given real authority.

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The ESG management and resulting achievements of Ørsted, Patagonia, and Unilever were introduced. These three companies share common characteristics. First is the leadership of management with foresight and drive. Ørsted’s management reduced its fossil fuel power business, which was profitable, and challenged the unknown field of wind power, showing the drive to reach the goal without wavering despite difficulties faced during the process. Ørsted self-assesses, “The really important fact is that problems that appear to be technical or financial challenges are actually leadership issues. We emphasized leadership to achieve innovation toward a more sustainable business model.” Patagonia and Unilever are similar. Patagonia’s founder Yvon Chouinard gave up the core steel piton business and insisted on a management philosophy that prioritizes the environment over profits. Unilever’s CEO Paul Polman made the bold decision not to disclose quarterly earnings despite market resistance and rejected Kraft Heinz’s acquisition temptation to protect a sustainable company. These examples clearly show how crucial authentic CEO leadership is in ESG management.

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Next ESG | Written by Choi Nam-su | Saebit Books | 308 pages | 18,000 KRW