What is the difference between Sustainability and ESG

While ESG and sustainability are closely related and often overlap, ESG is more focused on specific criteria used for investment decisions, and sustainability encompasses a broader, more comprehensive approach to ensuring long-term environmental, social, and economic health.

ESG (Environmental, Social, and Governance) emerged as a terminology for investors and businesses to simplify and streamline their approach to sustainability, with guidelines promoted by organizations such as Nasdaq. ESG focuses on specific criteria that investors use to evaluate a company's ESG performance.

Sustainability is a broader concept encompassing a much wider range of environmental, social, and governance factors and as well includes the society and economic factors.

The European Union (EU) is one of the pioneers in introducing sustainability within regulatory framework and has been at the forefront of promoting sustainability through various directives and regulations aimed at enhancing environmental protection, social responsibility, and governance practices. This includes CSRD, Taxonomy and SFDR and more regulations that are on the horizon.

Scope:

• ESG is a specific set of criteria mainly used to assess company performance.
• Sustainability is a broader concept that applies to overall practices and policies aimed at long-term viability and balance.

Application:

• ESG focuses on how environmental, social, and governance factors impact a company's financial performance and risk profile.
• Sustainability focuses on the overall impact of practices and policies on the environment, society, and economy.

Audience:

• ESG is primarily investor-focused, providing a framework for making informed investment decisions.
• Sustainability is broader, targeting various stakeholders, including businesses, governments, communities, and investors, to promote long-term health and viability of the planet and societies.