I’ve had some version of this conversation hundreds of times.
Someone pulls me aside after a meeting, or a client slips it into an email almost apologetically: “Can I ask… what actually is ESG? Like, in plain English?”
And every time, I’m glad they asked, because the official definitions floating around out there are technically correct and almost completely useless.
So here’s the version I wish existed sooner.
Key Takeaways
- The Definition: ESG stands for Environmental, Social and Governance, a framework for measuring how a business operates beyond its financials
- The Mandate: In Australia, the mandatory component is now law. ASRS requires climate disclosure from thousands of entities
- The Starting Point: Understanding the language is where it begins, and a free Climate Readiness Assessment is where most businesses start
The short answer
ESG stands for Environmental, Social and Governance. It’s a way of measuring how a business operates beyond its financials, not just “are they making money”, but”how are they making it, and at whose expense.”
The slightly longer answer
Environmental is roughly what you’d expect. Carbon emissions, energy use, water consumption, waste, and land use. How does the business interact with the natural world?
Social is about people. Employees, supply chains, communities. Are workers paid fairly? Are there meaningful diversity and inclusion practices in place? What’s the relationship with the communities the business operates in?
Governance is the one people talk about least, but it might be the most foundational. It covers how a company is led and held accountable. Board composition, executive pay, shareholder rights, and anti-corruption policies. The stuff that determines whether the E and the S are actually taken seriously, or just good marketing.
Together, they give you a more complete picture of a business than a profit and loss statement ever could.
Why does it matter right now?
ESG has gone from a niche concern to a mainstream one pretty quickly, and in Australia, it’s no longer optional for a growing number of businesses.
From 2025, Australia’s largest companies are required to report against the Australian Sustainability Reporting Standards (ASRS). These are mandatory, auditable disclosures.
Group 1 companies (those with over $500 million in consolidated revenue, $1 billion in assets, or 500+ employees) are first cab off the rank. Smaller businesses follow in subsequent years.
The practical implication? If you’re in the supply chain of a large business, or you’re seeking finance, or you’re trying to attract and retain talent, ESG performance is increasingly something you’ll be asked about.
The reasonable criticism
I’d be doing you a disservice if I didn’t acknowledge that ESG has also become, in some circles, a masterclass in saying a lot while doing very little.
Greenwashing, which is overstating environmental credentials, is a documented, widespread problem. ASIC has already taken action against Australian funds for misleading ESG claims. And when a term gets picked up by marketing departments faster than it gets understood by boards, you end up with a lot of noise and not much signal.
So what’s the actual point?
ESG is a response to a pretty simple question: Should profit be the only measure of a good business?
Most people, when asked plainly, would say no. ESG is the attempt (at times messy, evolving, imperfect) to build that answer into how we assess, invest in, and run organisations.
The frameworks
Once you understand what ESG is, the next question is usually: ok, but how do you actually measure it?
This is where frameworks come in. And this is also, if I’m being honest, where a lot of people’s eyes glaze over.
There are a lot of them. They have similar-sounding names. They overlap in confusing ways. And for a long time, businesses could pick whichever one made them look best.
That’s changing. But to understand where we’re headed, it helps to know where we came from.
GRI: Global Reporting Initiative
GRI has been around since 1997 and is probably the most widely used sustainability reporting framework in the world. It’s broad, covering everything from emissions to human rights to anti-corruption. Think of it as the comprehensive option, detailed, stakeholder-focused, and designed to tell the full story of a company’s impact on the world.
The criticism? Precisely because it’s so broad, it can become a document-dumping exercise. Comprehensive doesn’t always mean useful.
TCFD: Task Force on Climate-related Financial Disclosures
Created in 2015 by the Financial Stability Board, TCFD narrowed the focus considerably. It asked a specific question: What are the financial risks and opportunities that climate change poses to your business?
It introduced the idea of scenario analysis, essentially asking companies to stress-test their strategy against different climate futures. TCFD became the backbone of climate disclosure globally, and its influence is baked into almost everything that came after it.
ISSB: International Sustainability Standards Board
The newest and, increasingly, the most important player globally. Established in 2021 under the IFRS Foundation, the ISSB released its first two standards in 2023: IFRS S1 (general sustainability disclosures) and IFRS S2 (climate-specific disclosures).
The goal was to do for sustainability reporting what IFRS did for financial reporting: create one globally consistent language. Whether that ambition fully lands remains to be seen, but the direction of travel is clear.
What’s happening in Australia?
The Australian Sustainability Reporting Standards (ASRS), developed by the Australian Accounting Standards Board (AASB), are directly based on the ISSB framework.
- AASB S1 covers general sustainability-related financial disclosures (voluntary)
- AASB S2 covers climate specifically (mandatory)
Australia has adopted the global standard and made it mandatory. It signals that sustainability reporting is no longer a nice-to-have sitting alongside the financial statements.
The end… almost
If your head is spinning a little, that’s normal. The framework landscape evolved over decades, with different bodies solving different problems at different times. There’s overlap, some tension, and ongoing debate about which disclosures actually drive better outcomes versus which ones just drive better paperwork.
But here’s what I’d hold onto: the direction is toward consolidation, consistency, and consequence. The days of cherry-picking a framework that flatters your performance are largely over, at least for large businesses.
For everyone else, now is a good time to get familiar. Not because the regulator is knocking on your door yet, but because the businesses you work with, invest in, or sell to are already operating in this world.
Understanding the language puts you in the conversation. And being in the conversation is where it starts.
Acumentis ESG helps Australian businesses navigate these obligations, starting with a free Climate Readiness Assessment.
How can Acumentis help?
We help Australian businesses move from ESG confusion to boardroom-ready compliance. We focus on these practical steps to protect your assets and build your internal skills.
- ASRS Climate Reporting: We find the holes in your current data before the auditors. Learn more →
- Resilience Modelling: We test your assets against future climate paths to find your financial hotspots. Learn more →
- Audit-Ready Data: We turn your raw records into verified facts that lenders and insurers trust. Learn more →
- Governance Frameworks: We help your board understand its ESG governance framework and legal duties.
- Capability Transfer: We train your team so you can eventually own the process yourself.
ESG isn’t optional anymore. But it doesn’t have to be complicated.
Take the first step toward boardroom certainty with our free tools and advisory support.
- Take the Climate Readiness Assessment → Find out exactly where your business stands against the new laws with our free assessment tool.
- Book a free discovery call → We’ll walk through your specific industry risks and tell you exactly what needs to happen to protect your assets.
Frequently Asked Questions
ESG stands for Environmental, Social, and Governance. It is the framework used by banks, regulators, and boards to measure a company’s resilience to risks like climate change and modern slavery.
Yes, certain parts of ESG are now mandatory under the ASRS laws. If your business meets specific revenue or asset thresholds, you are legally required to disclose your climate risks and emissions.
Sustainability is the broad goal of operating without depleting resources. ESG is the specific set of metrics and governance rules used to track and report on that progress for investors and regulators.
An ESG score is a rating given by third-party agencies to show how well you manage risks. While not every private firm has an official score, most lenders now use their own internal scoring to set your interest rates.
ESG is the broad strategic framework. ASRS is the specific Australian legislation that makes climate reporting mandatory for large entities and their supply chains.
The best way to start is with a Climate Readiness Assessment. This identifies your missing data points and creates a clear roadmap for your first mandatory report.
