Sustainability and ESG Integration

Abstract

In the modern financial landscape, the integration of sustainability and ESG has emerged as an imperative part for managers. Amid growing pressure and demand from multiple stakeholders, managers are confronted with diverse challenges in the integration of sustainability and ESG into the financial system. This chapter scrutinizes the evolving financial system due to sustainability and ESG, elucidating the challenges it presents for managers. Before discussing the challenges, authors delve into related theories namely stakeholder theory and legitimacy theory, followed by a conceptual review and how researchers measure sustainability and ESG. This provides an overview of current research findings and directions to establish a common understanding of the topic discussed. The challenges faced by managers were discussed based on four salient areas. It includes the business case for sustainability, ESG metrics and reporting standards, sustainable investment criteria and stakeholder engagement for sustainability. At the end of this chapter, actionable recommendations were provided to the managers to navigate the challenges faced in the modern financial landscape. Authors recommended high quality audit, disclosure of accurate and consistent information and adoption of a comprehensive ESG matrix that integrates paramount business cases for the company to delineate the challenges faced by them. It further discusses additional techniques and tools that managers can incorporate to manage sustainability and ESG integration effectively.

Citation

Muaaz, H. and Ali, M. (2024), "Sustainability and ESG Integration", Ali, M., Choi-Meng, L., Puah, C.-H., Raza, S.A. and Sivanandan, P. (Ed.) Strategic Financial Management, Emerald Publishing Limited, Leeds, pp. 13-33. https://doi.org/10.1108/978-1-83608-106-720241002