ESG values and their effect on organisations

Laura Baselga-Pascual

Guillermo Badía

Deusto Business School

Guest Editors of the special issue entitled ‘ESG values: how to make them a reality in organisations’

doi: https://doi.org/10.18543/bee.2642

Published online: March 2023

The motivation for this Special Issue of the Bulletin of Economic Studies was triggered by the goal to provide a forum to further and disseminate the knowledge about the multiple research topics related to environmental, social and good governance (ESG) criteria, and their effect on organisations. This issue addresses several themes from different perspectives with the aim of generating holistic knowledge. Some of the issues that arise in this field and have yet to be overcome include:

•Good corporate governance: How can it be measured? What types of indicators exist? How are they constructed? Are the available indicators good proxies for good governance? What is the relationship between good governance and organisational performance?

•The social and environmental commitment of organisations: To what extent can organisations contribute to a decarbonised world? Can they have a positive impact on global warming? What financial products can be considered to be sustainable? Are sustainable financial products more profitable? Do they provide greater investor diversification? Do they reduce risk?

•Companies’ social impact: What policies support the development of human capital in organisations? Are good practices regarding social policies linked to companies’ performance and/or value?

•Socially Responsible Investment (SRI): What is the purpose of SRI? Is it possible to have both a decarbonised planet and economic growth? Can SRI contribute to greater financial stability? How are ESG policies and values brought into financial institutions? Is impact investing a truly sustainable option?

•New regulations linked to sustainable finance: non-financial reporting, disclosure obligations, new EU taxonomy, regulations linked to the circular economy.

These issues are highly important given the development of ESG values that has taken place in organisations in recent years. They were initially seen as a superfluous, merely decorative feature; later they were perceived as a differentiating element; and today they are a necessary—albeit insufficient—condition for competing in an engaged global market. Social and environmental responsibility derived from a commitment to ESG factors in organisations is linked to better governance and higher ethical standards.

There has been a shift from merely maximising shareholders’ profits to meeting the needs of other stakeholders, which ultimately seems to be connected with organisational value and can lead to a virtuous circle. However, despite the sustainability-related initiatives in recent years, scientific research still shows that the state of the environment continues to deteriorate. For example, the 2021 Eurosif (European Sustainable Investment Forum)[1] Report noted that climate change is accelerating driven by a continued rise in global temperature, biodiversity loss is occurring at an unprecedented rate, and socio-economic disparities have increased. This scenario urges a process of reflection and discussion about new tools and alternative mechanisms to design and build a truly sustainable economy, both environmentally and socially.

In recent decades, financial market participants have progressively embraced sustainability by including non-financial criteria such as ESG values in their investment and financing processes. At the start of 2020, according to the Global Sustainable Investment Review (GSIR), global sustainable investment reached US$35.3 trillion across five major markets (Australasia, Canada, Europe, the United States and Japan), a 15% increase over the previous two years (2018-2020). In particular, the Spanish market also followed the path of sustained growth as in previous years. Domestic ESG assets increased by 10% compared to 2019 (Spainsif study, 2021). From an investment perspective, according to the European Commission, incorporating ESG factors into investment decisions leads to longer-term investments in sustainable economic activities and projects.

Environmental considerations could include climate change mitigation and adaptation, as well as broader environmental considerations such as the preservation of biodiversity, pollution prevention and the circular economy. Social considerations relate to issues of inequality, inclusion, labour relations, investment in human capital and communities, as well as human rights issues. The governance of public and private institutions—including management structures, employee relations and executive compensation—plays a key role in ensuring that social and environmental considerations are included in the decision-making process. From a financing perspective, sustainable finance is understood to be financing that supports economic growth while reducing pressures on the environment and taking into account social and governance aspects.

Academia in general, and research in particular, plays a leading role in shaping and developing alternative innovative systems through research and knowledge transfer publications for the subsequent dissemination of results. This issue contains a number of research and knowledge transfer articles that support this development.