ESG has become to the corporate world what the internet is to individuals — a vital, transformative force. Corporate governance today revolves around how companies engage with stakeholders like suppliers, competitors, regulators, and shareholders. With the sharp rise in investor activity, the concept of investor stewardship — where investors actively push companies to improve their governance practices — has gained traction among ESG professionals.

Shareholders now play a key role in promoting ethical behavior and robust management structures within companies. Yet, some recent shifts in policy have challenged ESG objectives. For example, in late 2024, Walmart modified its diversity, equity, and inclusion (DEI) efforts, originally designed to foster workplace diversity. Several major corporations followed suit in 2023, revising their DEI strategies and prompting discussions about ESG consistency and impact.

A Window of Opportunity for Companies

Despite the noise and setbacks, ESG reporting continues to gain momentum. A growing number of companies are voluntarily publishing sustainability disclosures, with many leaning on recognized frameworks to guide their efforts. Recent investor surveys suggest that ESG-focused investing is only expected to grow, with the majority of institutional investors planning to increase their ESG allocations over the next few years.

Leading with Purpose

ESG has shifted from a checkbox to a core strategy for investors who want both financial returns and social impact. This approach — often referred to as values-based investing — allows investors to align their portfolios with their principles. Whether it’s ESG investing, socially responsible investing (SRI), or impact investing, the focus is on balancing financial gains with broader ethical, social, or environmental goals.

Take SRI, for instance — it involves selecting investments that not only perform financially but also contribute to positive societal outcomes. Impact investing goes a step further, aiming to drive measurable progress in areas like clean energy, education, and healthcare, while still targeting returns.

To apply these strategies effectively, investors often screen out companies involved in controversial industries such as tobacco, firearms, or fossil fuels. Instead, they seek out businesses advancing sustainable practices and innovations.

Here are a few reflective questions for anyone considering values-based investing:

How might this strategy affect overall performance?
What are the potential risks, and how can they be managed?
Does the company follow ethical business standards?
What steps is the company taking to reduce its environmental footprint?

ESG Reporting as a Strategic Tool

As ESG becomes a fixture in boardroom conversations, companies are feeling the pressure to build trust with investors, align with climate goals, and drive long-term innovation. ESG reporting offers a transparent window into how a company approaches sustainability — not just internally, but in comparison to industry benchmarks.

Effective reporting should address key questions like:

What kind of ESG information do stakeholders actually want?
Who’s responsible for ESG oversight — the full board or a dedicated committee?
How does the company evaluate ESG risks and integrate them into strategy?

While clear and consistent reporting enhances brand reputation, misleading or exaggerated claims can backfire, leading to accusations of greenwashing. Thankfully, various global standards — like GRI, SASB, and CSRD — are helping bring structure and comparability to ESG disclosures, making it easier for companies to communicate their efforts credibly.

The growing acceptance of unified ESG standards also helps companies improve their reporting quality. For example, those covered under the European CSRD now follow the ESRS framework, while global entities are starting to adopt IFRS sustainability standards like S1 and S2, which provide clear guidelines for disclosing risks and opportunities tied to ESG.

Building Long-Term Value Through ESG

Companies that embrace ESG not only earn consumer trust but also tap into new markets and strengthen their brand value. Research shows that discussing ESG issues during earnings calls can correlate with measurable increases in company valuation. Sustainability initiatives often lead to increased customer loyalty, particularly among those who prefer brands that reflect their values.

People are now more willing than ever to pay a premium for ethical, sustainable products. This shift reinforces the idea that ESG is no longer optional — it’s an expectation. And businesses that treat it as such are often better positioned to lead.

Looking Ahead: ESG as a Business Imperative

Investing in ESG isn’t just about risk mitigation — it’s a forward-thinking strategy for long-term success. Companies with strong ESG foundations are more resilient, more innovative, and more appealing to investors. As the landscape evolves, decision-makers will increasingly rely on data-driven tools to measure ESG performance and compare progress across industries. That’s where an effective ESG data platform can be instrumental — offering the insights companies need to stay competitive, credible, and compliant in a rapidly changing world.

Understanding ESG: Value, Impact, and What’s Next for Businesses