ESG and sustainability expertise is the need of the hour. One can train and learn this knowledge and these skill sets. Irrespective of the industry and job function, ESG knowledge is important and imperative. Organizations are looking to acquire these skills from the perspective of ESG investing, ESG reporting, central bank regulations, ESG risk reduction, and many more. Understanding ESG is not just beneficial but increasingly necessary in today’s world.
Before we delve into the core mechanics, here we are discussing one of the core concepts, "the Tragedy of the Commons." We are borrowing this concept from economics and political science, a powerful concept that illustrates the conflict between individual interests and the common good. It concludes that as humans, we can act against our long-term interests knowingly. For illustration and simplification,
Humans can choose to lose 1 million USD over a year for earning 5000 USD monthly. Interesting!
Setting the stage of our illustration are three farmers each having three cows grazing on a common field (open to all). Now, each cow represents milk and a potential income source for the farmer. And more cows mean more income.
However, if these three farmers think this way and continuously add more cows to the field, the grass could be overgrazed, leading to its eventual depletion. This is detrimental to all farmers. The common field, a shared resource, can no longer provide food for any cow, and the source of survival can go away. Despite knowing this, each farmer is incentivized to add more cows as the benefits are reaped individually, while the cost (depletion of the field) is shared by all.
Hence we have seen that rationally human beings can logically opt for a significant annual deficit over minimal monthly profits.
Common field here is this planet Earth, air, water, oceans, land, society we live in, etc. This tragedy plays out in numerous scenarios, such as overfishing in the ocean, deforestation, carbon emissions contributing to climate change, and many more. Hence, it is important to understand sustainability and sustainable business practices..
Moreover, given the significant long term impact possible, regulations, governmental intervention, and collaborative efforts are crucial.
Overall, when one is looking at sustainability as a domain, they should consider the collective good. As businesses and societies, human civilization has suffered from this tragedy. And while building one's knowledge and understanding of the domain, one should always reflect on how these commons are important for us.
At ESGWEISE we are dedicated to helping organizations integrate environmental, social, and governance (ESG) principles into their core business strategies. For more contact us at Contact@esgweise.com
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