The terms “ESG” and “United Nations Sustainable Development Goals (UN SDGs)” refer to two different, yet somewhat related, concepts in the realm of sustainable and responsible investing and development. It is important not to confuse, or interpret the two terms as being the same. Many people are not sure how SDG and ESG are different. This post will explain the distinction and relationship between the SDGs and ESG, which are often confused. So, what are the differences between ESG and the United Nations SDGs?
- ESG (Environmental, Social, and Governance):
- Focus: ESG is a framework used primarily in the business and investment world. It assesses a company’s performance and impact in three specific areas: environmental stewardship, social responsibility, and governance.
- Environmental Criteria: How a company performs as a steward of the natural environment.
- Social Criteria: How the company manages relationships with employees, suppliers, customers, and the communities where it operates.
- Governance Criteria: How a company is governed, e.g., executive pay, audits, internal controls, and shareholder rights.
- Purpose: ESG criteria are used by investors to screen potential investments, manage risks, and identify companies that are likely to be sustainable in the long-term. It’s more about the operational processes of a company and its own sustainability.
- United Nations Sustainable Development Goals (SDGs):
- Focus: The SDGs are a collection of 17 interlinked global goals designed to be a “blueprint to achieve a better and more sustainable future for all” by 2030. They were set up in 2015 by the United Nations General Assembly.
- Broad Scope: The SDGs cover a broad range of social and environmental development issues such as poverty, hunger, health, education, climate change, gender equality, water, sanitation, energy, urbanization, environment, and social justice.
- Purpose: These goals are intended to be achieved by countries, organizations, and individuals worldwide. While they guide governments and policy-making, they are also increasingly used by businesses to align their sustainability strategies with broader global priorities.
- Holistic Approach: Unlike ESG, which is more company-specific, the SDGs provide a comprehensive framework for addressing systemic challenges at a global scale.
In summary, while ESG is a criterion primarily used in the corporate and investment sector to evaluate how a company operates and manages risks related to environmental, social, and governance factors, the UN SDGs are broader goals that aim to address global challenges and guide sustainable development at a macro level. Companies might align their ESG initiatives with specific SDGs to contribute to these broader goals. FundingHope was developed, not as an ESG focused company, but as an investment crowdfunding platform that connects everyday investors with founders committed to achieving UN Sustainable Development Goals in disadvantaged and rural communities. Join us!