Environment, Social and Governance

ESG, which stands for environmental, social and governance, is a framework and set of criteria for evaluating the sustainability and ethical impact of an organization. ESG factors include, environmental impact, social responsibility and corporate governance. As the world becomes more aware of the impact of climate change and other sustainability issues, ESG is becoming a more important factor in decision-making to businesses, investors and consumers.

For investors, companies with strong ESG practices are more likely to be sustainable

and profitable in the long run because they are less likely to be involved in environmental disasters, social scandals or governance failures. They will also be more likely to be innovative, efficient and profitable.  For consumers and civil society, companies that have strong ESG practices can help create a more sustainable future by helping reduce pollution, protect the environment and create a more equitable society. This has fueled the growing demand for sustainable products and services. Consumers also have more trust in the quality and safety of the products of companies who practice ESG. For business, it is becoming critically important to consider ESG factors as investors, consumers and regulators are demanding more transparency and accountability from companies.

Embedding ESG into strategy can help companies improve reputation and brand image, increase customer loyalty and sales, reduce costs and risks and attract socially responsible investors. And adopting  ESG can also allow companies to gain access to new markets and opportunities, increase employee engagement and productivity, improve compliance with laws and regulations, enhance corporate governance, reduce environmental impact and offer positive social impact. Thus, the companies are able to engage customers more effectively, launch products successfully, access new markets, and enhance and protect brands to drive long-term growth.

Once considered exclusively for the largest global companies that can afford it, ESG has moved into the mainstream and been adopted by smaller, privately owned companies.

The Philippines is no exception to this trend. In recent years, there has been a growing focus on ESG in the country, driven by the same factors mentioned above. The government, business community and civil society are all working together to promote ESG and make the country more sustainable. From a regulatory standpoint, Memorandum Circular No. 4, series of 2019, issued by the Securities and Exchange Commission in 2019, is the main tool for sustainability reporting. This requires publicly

listed companies to submit an annual sustainability report under a “comply-or-explain” approach.

Several banks, insurance companies and mutual funds in the Philippines already offer ESG funds including BDO, BPI, RCBC and FWD (insurance). However, the number pales in comparison with other Southeast Asian countries. Malaysia now has 16 ESG funds, while Thailand and Indonesia have 10 and nine, respectively.

Most local companies are still implementing a corporate social responsibility approach to

sustainability, while other companies use an enterprise risk management framework as the basis for their ESG approach. However, a growing number of companies have adopted ESG policies as a core operating principle rather than just for regulatory compliance.

The growth of ESG in the Philippines is still in its early stages, but it is clear that it is a trend that is here to stay. As the country continues to develop, ESG will become increasingly important for businesses that want to succeed in the long term. 

In the light of the above, one may ask, how would data analytics and artificial intelligence ( AI ) help these companies design their ESG programs , to best help and positively impact society, the environment, and governance for the good of everyone?

The following are some of the ways by which data analytics and AI can help companies make more informed decisions to benefit , both their businesses and society, as a whole. By leveraging data analytics and AI technologies, companies can - a). Collect and analyze large amounts of data from various sources to identify trends and patterns in their ESG performance, like data on carbon emissions, water usage, waste management, employee diversity and community engagement ; b). Build predictive models to forecast the impact of their ESG programs on various stakeholders, such as employees, customers, and the environment; c). Use natural language processing ( NLP ), for companies to be able to analyze data from social media posts and news articles, and understand public sentiments, thus, help companies identify areas where they can improve their ESG programs and adjust their approach accordingly ; and d). Analyze company’s supply chain to identify potential ESG risks and opportunities and in the process improve their ESG performance.