The Role of ESG in Mitigating Climate Change

The world is warming faster than at any point in recorded history, altering weather patterns and disrupting the usual balance of nature.

Climate change, primarily caused by human activities, is a pressing global emergency that is causing dangerous and widespread disruption in nature and affecting the lives of billions of people around the world (IPCC, 2022). The world is warming faster than at any point in recorded history, altering weather patterns and disrupting the usual balance of nature. This poses significant risks to human beings and all other forms of life on Earth (United Nations, n.d.). The effects of climate change are heightening competition for resources such as land, food, and water, fueling socioeconomic tensions and, increasingly often, leading to mass displacement (United Nations, n.d.). Increased heat waves, droughts, and floods are already exceeding plants’ and animals’ tolerance thresholds, driving mass mortalities in species such as trees and corals. These weather extremes are occurring simultaneously, causing cascading impacts that are increasingly difficult to manage (IPCC, 2022).

This phenomenon has exposed millions of people to acute food and water insecurity, especially in Africa, Asia, Central and South America, on Small Islands, and in the Arctic. To avoid mounting loss of life, biodiversity, and infrastructure, ambitious, accelerated action is required to adapt to climate change, at the same time as making rapid, deep cuts in greenhouse gas emissions (IPCC, 2022). The urgency of climate change is underscored by the fact that even a half-degree Celsius increase in global temperatures is leading to more evaporation, resulting in more water in the atmosphere and changing conditions that put our agriculture, health, water supply, and more at risk (Environmental Defense Fund, 2024). Therefore, addressing climate change is not just an environmental issue, but a matter of international peace, security, and human wellbeing (United Nations, n.d.).

Climate change mitigation is a critical global endeavor that aims to reduce greenhouse gas emissions and limit the amount of warming our planet will experience. It focuses on the root cause of climate change, the heat-trapping greenhouse gasses humans are adding to the atmosphere faster than our planet can absorb them. Almost three-quarters of humans’ greenhouse gas emissions come from burning fossil fuels like coal, oil, and natural gas. Therefore, mitigation often focuses on replacing those fuels with other sources of energy, like renewables and nuclear power. Mitigation can also tackle other sources of greenhouse gasses, such as protecting forests from being cut down or collecting methane from landfills. Other forms of mitigation, like growing new forests and designing and building “direct air capture” systems, work by taking greenhouse gasses out of the atmosphere. These approaches are challenging to do at a very large scale, and they do not eliminate the need to drastically lower our emissions. However, authorities like the Intergovernmental Panel on Climate Change agree that some carbon removal will be needed to head off the worst climate change scenarios (Campbell & Krol, 2023).

Global cooperation is essential for all climate change mitigation. The United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement ensure cooperation across borders to tackle climate change and ensure a sustainable future (EEA, 2024). The sooner the world stops the rise of greenhouse gasses, and shields people from the warming we have already caused, the less we will ultimately have to spend to stabilize our climate, and the more lives and livelihoods we will save along the way (Campbell & Krol, 2023). Energy efficiency measures and actions to reduce short-lived climate pollutants are producing health- and food-related co-benefits. Model results for 2030 suggest that health benefits from reduced ozone and PM2.5 exposure could be as large as 5 percent of global GDP, while many countries could also enjoy substantial increases in crop yields. Therefore, climate change mitigation is not only about reducing emissions and preventing environmental degradation, but it is also about improving human health, food security, and economic prosperity (Hamilton et al., 2017) (Fawzy, 2020).

The role of ESG in mitigating Climate Change


Environmental, Social, and Governance (ESG) practices are a set of standards used to measure an organization’s societal and environmental impact (Krantz & Jonker, 2024). Companies can significantly reduce their greenhouse gas emissions and environmental impacts through the implementation of ESG practices (Kaplan & Ramanna, 2021) (McKinsey, 2022). One of the key areas is environmental responsibility, which involves reducing greenhouse gas emissions, conserving natural resources, and minimizing waste4. Companies can implement sustainable practices such as using renewable energy, optimizing transportation and logistics, and incorporating circular economy principles (McGrath & Jonker, 2024). The circular economy policies can work together with climate change mitigation policies to create multiple benefits, such as reducing material use, waste, and greenhouse gas emissions (European Environment Agency, 2020). Furthermore, corporations are facing growing pressure from investors, advocacy groups, politicians, and even business leaders themselves to reduce greenhouse gas emissions from their operations and their supply and distribution chains (Kaplan & Ramanna, 2021). Therefore, ESG practices not only contribute to climate change mitigation but also enhance a company’s reputation and relationship with stakeholders (McKinsey, 2022).


Companies can contribute significantly to social justice and community welfare through the implementation of Environmental, Social, and Governance (ESG) practices. The ‘Social’ pillar of ESG resonates strongly with social welfare laws, which encompass everything from labor rights to healthcare access to poverty alleviation. By complying with these laws, companies not only mitigate legal risks but also contribute to a more motivated and productive workforce. Furthermore, companies can actively participate in welfare programs, either mandated by law or voluntarily, to contribute positively to societal development. This strengthens the social aspect of ESG by addressing community engagement, social justice, and overall well-being (Seneca ESG, 2023). In addition, by integrating social factors into investment decision-making, ESG investors support companies that prioritize diversity, inclusion, human rights, and access to essential services (Apex ESG Enterprise, 2023). Therefore, ESG practices not only contribute to social justice and community welfare but also enhance a company’s reputation and relationship with stakeholders (Serafeim, 2020).


               Good corporate governance and transparency are fundamental to improving accountability and encouraging sustainable business practices (Steele, 2021) (Setyahadi & Narsa, 2020) (Kim, 2023). Effective corporate governance ensures that the interests of diverse stakeholders, including employees, customers, suppliers, and communities, are considered and balanced (Apex ESG Enterprise, 2023). This engagement in decision-making processes fosters transparency, accountability, and trust, leading to stronger relationships and sustainable value creation4. By establishing effective boards of directors, promoting transparency and disclosure, respecting shareholder rights, fostering ethical behavior, implementing robust risk management practices, and embracing corporate social responsibility, businesses can build trust, attract investment, and achieve long-term success (Kim, 2023). Transparency breeds accountability, which is a big part of what drives change and improved results. Companies that imbue sustainability and transparency within them are material success factors. Furthermore, transparency also builds trust, trust that is foundational to your relationships with your employees and customers. Therefore, good corporate governance is not only about reducing risk and ensuring compliance, but it’s also about fostering a culture of transparency and accountability that encourages sustainable business practices (Steele, 2021).

The benefit of implementing ESG

               The implementation of Environmental, Social, and Governance (ESG) practices can bring significant benefits to a company, enhancing its reputation, attracting sustainability-focused investors, and driving innovation (McKinsey, 2022) (BDO, 2022). A strong ESG profile can improve a company’s image and brand value, making it more appealing to customers, employees, and investors (Abdullahi, 2022). This is because ESG practices demonstrate a company’s commitment to sustainable and responsible operations, which are increasingly valued in today’s market (Salonga, 2022). Furthermore, ESG-focused companies tend to attract sustainability-minded investors, who see ESG practices as indicators of long-term viability and risk management (Aplanet, 2024). These investors recognize that companies with robust ESG practices are better positioned to navigate regulatory changes, reputational risks, and shifts in consumer behavior (Salonga, 2022). Finally, ESG implementation can drive innovation by encouraging companies to develop new products, services, and business models that address environmental and social challenges. This can open up new markets and opportunities, contributing to the company’s growth and competitiveness (McKinsey, 2022) (Abdullahi, 2022).

               The benefits of Environmental, Social, and Governance (ESG) practices to society and the environment are substantial and multifaceted. ESG practices can contribute significantly to reducing pollution and combating climate change (Krantz & Jonker, 2024). For instance, they may include reducing direct and indirect greenhouse gas emissions, increasing resource efficiency, implementing recycling practices, understanding and reducing climate risks, increasing the use of renewable energy, and implementing water and waste management strategies (WBDG, 2024. These practices not only help the environment but also establish companies as leaders in the field and draw in environmentally sensitive customers. Furthermore, ESG practices create an environment that’s socially equitable, drives collaboration, and empowers diversity. This can improve people’s quality of life by fostering a more inclusive and equitable society. Therefore, ESG practices play a crucial role in promoting sustainable development, enhancing environmental stewardship, and improving societal wellbeing (Shahidi, 2024).

Challenges in implementing ESG

               Implementing Environmental, Social, and Governance (ESG) practices can pose several challenges for companies. One of the primary challenges is the cost of implementation. Transitioning to sustainable practices often requires significant upfront investment in new technologies, infrastructure, and training. Another challenge is the lack of knowledge and understanding about ESG practices. This can lead to resistance from employees and management, making it difficult to integrate ESG principles into the company’s culture and operations. Furthermore, companies face pressure from various stakeholders, including investors, customers, and regulators, to demonstrate their commitment to ESG (SGA Team, 2022). This can be challenging due to the complexity of ESG reporting and the risk of greenwashing, where companies give a false impression of their environmental responsibility (Dolan & Zalles, 2021). Additionally, companies may face challenges in collecting and managing ESG data due to its complexity and the limited resources available (Ojeda Alvirez, 2023). Despite these challenges, it’s important to note that the implementation of ESG practices presents many opportunities for companies to prioritize sustainable growth and cater to the sustainable viewpoint of investors, broader stakeholders, as well as customers, suppliers, and the community.


Environmental, Social, and Governance (ESG) practices play a crucial role in mitigating climate change and promoting sustainable development. They help companies reduce greenhouse gas emissions, minimize environmental impacts, and contribute to social justice and community welfare. ESG practices also enhance a company’s reputation, attract sustainability-focused investors, and drive innovation. Despite the challenges of implementation costs, lack of knowledge, and stakeholder pressure, the benefits of ESG practices to society and the environment are substantial. They contribute to reducing pollution, combating climate change, and improving people’s quality of life. Therefore, ESG practices are not only important for companies but also for the broader society and the environment.

Felix Broson Manurung
Felix Broson Manurung
I'm a Postgraduate Student in the Master of International Relations study from Gadjah Mada University, Yogyakarta, Indonesia. My current focus of study is Human Security and Global Political Economics.