The Importance of ESG Principles in the Transition to a Green Economy

What Is Happening to Our Planet?

Our planet Earth is facing numerous environmental challenges that threaten its ecosystem, biodiversity, and human well-being. These challenges include climate change, air pollution, biodiversity loss and deforestation, ocean acidification, scarcity of drinking water, overfishing, land degradation, and many other phenomena. These developments are occurring faster than previously anticipated. From extreme floods and storms to unprecedented heatwaves, we are increasingly feeling the impacts of global warming caused by human activities.

However, there is still time to make a change!

The Special Report on Global Warming of 1.5°C, published by the Intergovernmental Panel on Climate Change (IPCC) on October 8, 2018, states that in order to avoid the most severe consequences of climate change and to protect our planet from greater catastrophe, it is crucial to limit global warming to 1.5°C.

Naturally, the economy — a key system that ensures the production and consumption of goods and services to meet our needs — continues to grow. In this process, natural resources, human capital, and land play essential roles in economic development. Population growth is one of the driving forces behind economic expansion, as a growing population increases demand for goods and services. Increased demand, in turn, leads to greater consumption of resources, forming a feedback loop that accelerates mutual growth.

In 1540, the global population was 300 million. Modern population growth began around 1750, when the population reached 791 million, due to advancements in food production and distribution. A second population boom occurred in the 1960s, following post-war economic growth, often referred to as the “Baby Boom” era, marked by a sharp rise in birth rates. This led to increased food production and consumption and a significant reduction in mortality rates by the 18th century. According to estimates by the UN Population Division and the Population Reference Bureau in 1993, the global population was projected to reach 12.5 billion by 2021 — a potential increase of over 50% within 50 years.

According to a 2020 estimate by Matt Rosenberg of ThoughtCo., the global growth rate (overall and natural) was approximately 1.14% per year — enough to double the population in 61 years (projected to reach 13 billion by 2067). Comparing projections from different years, we see that the growth rate has been faster than expected. As of 2024, the world’s population has already surpassed 8 billion (source: https://www.worldometers.info).

Since 1960, global GDP per capita has increased more than fourfold.

Key milestones include:

• 1952: First passenger jet flight

• 1962: Founding of Wal-Mart (one of the world’s largest companies)

• 1971: First electronic email sent

• 1970s–1980s: Development in chemical and electronic systems

• 1990s: Rapid adoption of the internet, revolutionizing communication

  
  

Water covers 70% of the Earth’s surface, but only 3% of it is fresh water — a resource that is rapidly declining. There is a growing need to implement the concept of using technical water. From 1900 to 2024, agriculture has accounted for the majority of fresh water use. Natural resource utilization is a key component of the global economy. Developed countries consume more resources due to higher levels of consumption.

Waste generation is also rising. As of 2023, approximately 1,500 plastic bottles are discarded every second. The average decomposition time for a plastic bottle is about 450 years, though some may take up to 1,000 years to fully degrade. Alarmingly, 90% of all plastic bottles are not recycled.

In 1900, the amount of solid waste was about 0.5 million tons. Although the 2016 projection for 2100 estimated a figure of 12 million tons, by 2023 the volume had already reached 2 billion tons. It is estimated that by 2050, this number will exceed 3 billion tons.

The Green Economy

Against this backdrop, the green economy is a critical and timely topic.

The green economy is an economic model aimed at reducing ecological risks and environmental degradation while promoting sustainable development that does not harm the environment.

This concept emphasizes the importance of:

• Utilizing renewable energy sources

• Preventing pollution and reducing greenhouse gas emissions

• Promoting efficient and sustainable use of natural resources

Key proposals within the green economy include:

• Investing in renewable energy sources in the development of industry and business

• Implementing environmentally friendly production processes

• Managing waste, minimizing environmental impact, and promoting reuse

Green technologies and practices stimulate economic growth while solving environmental problems. To protect the environment, minimize harm, and conserve Earth's natural resources, green technology focuses on the development and implementation of less harmful technologies and alternative energies.

In recent years, green technology has attracted significant global interest and investment due to rising concerns about climate change and resource depletion. Investors are increasingly drawn to green technology–based activities and business models. Countries like Norway — along with its Nordic partners Sweden and Denmark — are globally recognized for their leadership in green technology, renewable energy, and sustainable resource management.

Governments, business stakeholders, and civil society all play vital roles in the transition to a green economy. Policies, regulations, incentives, and public awareness campaigns are essential tools for promoting sustainable development and supporting a greener and more resilient economy.

Key Components of the Green Economy:

• Renewable Energy: Expanding the use of renewable energy sources like solar, wind, hydro, and geothermal to reduce dependency on fossil fuels and lower carbon emissions.

• Sustainable Agriculture: Promoting farming practices that prioritize soil health, biodiversity preservation, and water efficiency while minimizing the use of synthetic pesticides and fertilizers.

• Resource Efficiency: Encouraging efficient use of natural resources, reducing waste, recycling, and promoting circular economy principles to minimize depletion and environmental degradation.

• Green Transport: Investing in public transport, electric vehicles, bicycle infrastructure, and alternative fuels to reduce emissions from the transport sector.

• Green Buildings: Constructing energy-efficient and environmentally friendly buildings using sustainable materials, efficient heating/cooling systems, and renewable energy technologies.

• Biodiversity Conservation: Protecting natural habitats, preserving biodiversity, and promoting sustainable land and marine resource management.

Green Economy and ESG: The Environmental Dimension

The green economy is closely aligned with the environmental pillar of ESG:

• Reducing environmental impact

• Conserving natural resources

• Mitigating climate change

ESG – Social (S): Although the green economy focuses primarily on ecological sustainability, it also intersects with the social aspect of ESG. Initiatives within the green economy often bring social benefits such as job creation, improved public health, and community well-being. Socially responsible investments align with these social dimensions by considering factors like labor practices, employee welfare, diversity and inclusion, and community engagement.

ESG – Governance (G): Strong governance practices such as transparency, accountability, and ethical leadership are critical for long-term value creation.

Aim

While the green economy and ESG share common goals related to sustainability and responsible business practices, they differ in scope, focus, application, measurement, and purpose.

• Scope & Focus:

The green economy focuses on environmental and resource sustainability across various sectors and industries.

ESG, on the other hand, evaluates companies’ environmental, social, and governance performance and investment potential — addressing how they manage ecological risks, stakeholder engagement, and governance structures.

• Application:

The green economy operates at a macro-economic level, involving systemic shifts in economic structures, policies, and practices to support low-carbon, resource-efficient, and socially inclusive economies.

ESG operates at a micro-economic level, focusing on assessing individual companies’ sustainability practices to inform investment decisions and promote responsible investing.

• Measurement & Evaluation:

The green economy assesses the overall sustainability of economic systems, policies, and practices.

ESG assesses internal ESG factors within companies.

• Goal:

The green economy aims to support sustainable development by integrating ecological, social, and economic considerations to promote long-term welfare and environmental protection.

ESG seeks to integrate sustainability considerations into investment decisions to reduce risk, identify opportunities, and promote responsible corporate behaviour.