Triple Governance
You might find this term somewhat surprising, but I prefer it to help us understand another term: ESG, which stands for Environmental, Social, and Governance. In fact, this term has not emerged only in the present; it has roots that date back decades, as it is linked to the practices of institutions of all kinds, particularly industrial ones. Many similar terms to triple governance have appeared since the beginning of the Industrial Revolution, where there was growing concern for human rights, whether for workers in factories or the surrounding communities. The fundamental aim is a green environment where people can live free from pollutants produced by factories, while capital owners seek infinite profits, resulting in chronic illnesses for others.
Thus, the idea of “One World, One Humanity” emerged, which was embraced by the United Nations in its development program launched at the beginning of this century (Sustainable Development), which established 17 goals, all working towards achieving the concept of “triple governance” (environment, society, commitment, and risks).
Let’s discuss ESG in more detail:
First: The Concept
Environmental, Social, and Governance (ESG) practices refer to a set of standards used by companies and investors to evaluate the environmental and social impact and corporate governance. Here’s an overview of the three elements:
- Environmental Practices (E)
- Climate Change: How the company addresses climate change risks.
- Resource Management: Energy and water consumption, and waste disposal methods.
- Biodiversity: The impact of business operations on the local environment.
- Social Practices (S)
- Human Rights: Respecting the rights of workers and local communities.
- Diversity and Inclusion: Promoting diversity in the workplace.
- Community Impact: The company’s contributions to the community and support for social projects.
- Corporate Governance (G)
- Transparency: The level of disclosure of financial and non-financial information.
- Compliance: Adhering to laws and regulations.
- Organizational Structure: How the company’s management is organized and having an effective board of directors.
Importance of ESG
ESG standards help investors make informed decisions and enhance the sustainability and reputation of companies in the market. Focusing on these standards can lead to improved financial performance and reduced long-term risks.
We can also discuss this term in relation to some of the following topics:
- Climate change and its impact on business: How environmental risks affect corporate sustainability.
- Labor rights and social justice: The importance of human rights in the workplace and its effect on reputation.
- Corporate governance and business ethics: The role of transparency and accountability in building investor trust.
- Sustainable investing: How investors can assess companies based on ESG criteria.
- Environmental management: Strategies for reducing carbon footprints and utilizing renewable resources.
We see that this topic is indeed of utmost importance at all levels and across various fields. This is why James Coleman, the famous sociologist, discussed it in his 1988 book titled “Social Capital for Creating Human Capital,” where he robustly opposed the prevailing notion of “self-interest,” referring to capital owners. He introduced a new term, “social capital,” to measure value. Coleman’s clever use of terminology resonated positively with investors, influencing their responses.
As a result, many organizations established consistent international standards to measure all key performance indicators (KPIs) according to the field and nature of each institution, whether measuring environmental or social indicators, in addition to key performance indicators within these organizations. None of this can be achieved without the responsiveness and flexibility of leaders, as well as their internal and external commitment to social responsibility as a right of the community towards these institutions.
