ESG and SDG are both concepts created to help countries and the business community to solve the most important social and environmental issues of today. More and more organizations are directing their attention to transforming their business processes and designing their operations around becoming more environmentally and socially responsible. This article presents the most important information you need to know about the ESG and SDG goals.
What is SDG?
SDG stands for Sustainable Development Goals. These are 17 goals set out by the United Nations as a blueprint to address the most pressing current world issues. SDGs were adopted by all UN Member States in 2015, aiming to deal with climate change, end global poverty, reduce inequality, and ensure fair opportunities of work and education for all. The goals are a part of the UN 2030 Agenda for Sustainable Development, which is a plan of action made to help all countries transition to a circular economy and create a sustainable future across the globe.
What is ESG?
ESG is a set of standards used to evaluate a company’s environmental, social and governance behaviour. ESG helps organizations integrate environmental and social aspects into their governance structures, daily operations and strategic objectives. ESG standards are focused on issues that consumers and employees deeply care about, such as protecting nature, fostering positive and diverse corporate environment, and ensuring fair and transparent management. More and more investors incorporate ESG criteria into their decision-making, seeking for long-term value and responsible investments.
The difference between SDGs and ESG
The acronyms SDGs and ESG are often used to mean similar things. Although these terms are related, they should be applied in different contexts. These are the key differences between SDGs and ESG:
Definitions. SDGs are 17 global sustainable development goals adopted by the UN Member States. Meanwhile, ESG is a set of evaluation standards that emphasize the importance of environmental, social and governance aspects of a company’s operations and management.
Application areas. SDGs are more general and apply to countries, aiming to solve environmental and human rights issues. ESG applies to companies and the business community.
Timeframe. While SDGs are goals to be achieved by 2030, ESG can be seen as methods that companies can use to work towards achieving those goals.
The overlap between SDGs and ESG is visualized below. Each of the 17 SDG goals can be attributed to either the Environment, Social or Governance category. When a company improves its performance in one of the categories, it contributes to achieving one or several related SDGs.
How are carbon offset projects contributing to SDGs?
A carbon offset project’s contribution to SDGs can be illustrated through a simple example. A typical natural carbon removal project involves planting trees. As such, the project also creates other benefits for the ecosystem and the community. This can be recognized by an independent party who can confirm that a specific carbon offset project also contributed to some SDGs set by the UN. The project is then registered in carbon registries, verifying the number of credits it generates and adding specific tags to inform which SDGs it contributes to. Usually, carbon credits generated by projects that contribute to more SDGs carry a higher price tag.
According to Gold Standard Impact Registry, most carbon offset projects contribute to at least three SDG goals. There are 19 forestry projects listed on the organization’s database[1], and 14 of them contribute to the three most common SDGs: Climate action, Life on Land, and Responsible Production and Consumption. As an example, planting woods on the land of former pastures in Central America not only contributes to reducing CO2 in the atmosphere, but also creates new habitats for endangered species, as well as provides local farmers with an opportunity to practice agroforestry.
Example of carbon offset projects and related SDGs in Gold Standard
What is GHG and how it differs from CO2?
Greenhouse gases (GHG) are gases that trap heat in the atmosphere and warm the planet. Carbon dioxide (CO2) comprises the largest portion of the greenhouse gases. CO2 is emitted through human activities, primarily through burning of fossil fuels, trees, waste, or other organic materials, also through manufacturing of fertilizer and cement.
A smaller portion of GHG is comprised of methane, nitrous oxide, and synthetic fluorinated gases. Although emitted in smaller amounts, these gases have a more potent warming effect than CO2. Methane is emitted from livestock and other agricultural practices, while nitrous oxide results from burning of fossil fuels, waste, and industrial activities. Fluorinated gases do not occur naturally and are emitted from industrial processes such as aluminium and semiconductor manufacturing.
GHG and CO2 are often used interchangeably, e.g., some organizations set a goal to reduce GHG, while others indicate the goal as CO2 reduction. However, usually, companies take measures to address CO2 reduction, which at the end of the day reduces GHG.