ESG was not originally a cost. Protecting the environment, fulfilling social responsibility, and establishing transparent governance were choices meant to enhance the long-term competitiveness of companies and nations. Indeed, at the starting point of ESG lay the awareness that "sustainability is ultimately connected to economic survival."
Nevertheless, ESG today is perceived by many companies and policymakers as a "burden" or an "additional cost." They must create separate ESG departments, write reports, and hire additional staff to meet regulations. They must manage carbon emissions data and verify supply chains. Yet from a corporate perspective, none of this often leads to immediate revenue growth. In the end, ESG began to feel like something that "is clearly a good thing, but costs money."
Where does this gap come from? The problem lies not in intention but in structure. The first reason ESG became a cost is the measurement method. ESG has long been treated as the language of declarations and reporting. The focus was on explaining how much effort was being made. But what matters in the world of investment and policy is not the narrative of effort, but comparable numbers.
For example, a company may say it is "working to reduce carbon," but it is difficult to know how much it has actually reduced. Another company may say it uses eco-friendly materials, but does not disclose carbon emissions across the entire supply chain. In such a structure, the market finds it hard to trust ESG.
In the end, ESG becomes not a manageable target but a document for regulatory compliance. In fact, global financial markets have repeatedly faced the problem of ESG rating agencies producing widely differing results. For the same company, one agency often gave a high ESG score while another gave a low rating. This is because their standards differ. From an investor's perspective, ESG begins to look not like an objective indicator but like a matter of interpretation.
At that moment, ESG turns from a value-creation tool into an administrative burden.
The second reason is disconnection. In many companies, ESG remains separate from core strategy. Production, research and development, and investment decisions move according to existing methods, and ESG is attached at the end in the form of a report. In other words, ESG becomes not the center of management but after-the-fact explanatory material.
For example, consider a structure in which a manufacturing company operates with output expansion and cost reduction as its top priorities, then writes a separate ESG report at year-end. In this case, ESG is not connected to actual management strategy. Naturally, it cannot help but feel like a cost.
Conversely, when ESG begins to connect with strategy, the situation changes completely. For example, in the global automotive industry, carbon data on battery supply chains is becoming a condition for future market access. Simply producing electric vehicles is no longer enough. How the battery was made, what its recycling ratio is, and whether there are supply chain risks are all demanded together.
In this case, ESG is no longer "additional work." It becomes product competitiveness itself. Europe's Carbon Border Adjustment Mechanism (CBAM) symbolically demonstrates this. If carbon emissions data cannot be properly proven, export costs increase. ESG is now connected not to corporate image but to trade structure.
The third reason is the absence of reward. If it is unclear what is gained from doing ESG well, companies find it difficult to invest continuously. In fact, this is where many companies feel the greatest fatigue while carrying out ESG activities.
"So what changes?" The answer to this question was not clear. For example, introducing eco-friendly equipment increases initial investment costs. Strengthening supply chain due diligence also increases management costs. But if financial benefits or improved market access are not clearly connected, companies continue to perceive ESG as a cost.
Recently, however, global financial markets are changing rapidly. The European Union's sustainable finance policies and the expansion of the green bond market have begun connecting ESG performance to actual financial conditions. Companies with strong ESG performance are increasingly likely to receive lower financing costs or hold an advantageous position in attracting long-term investment. In other words, ESG has begun to become not a matter of ethics but a matter of the cost of capital.
This is also why Singapore's RIE2030 is interesting. RIE2030 does not treat ESG as a separate ethical item. Instead, it repositions ESG within the core mechanism of the transformative economy. ESG becomes not "something that must be done," but a system that proves transformed value.
Here, the role of digital becomes important again. For ESG to escape from being a cost, performance must be measured, accumulated, and made comparable. It is precisely at this point that Digital ESG emerges.
Digital ESG changes ESG from the language of emotion and declaration into the language of data. It manages carbon emissions, energy efficiency, resource circulation rates, supply chain risks, and social contributions as real-time data. For example, if a smart factory measures energy use and carbon emissions simultaneously, ESG is no longer a separate report. Production efficiency management and ESG management are integrated into a single system.
The same applies to cities. Singapore integrates and manages data on electricity use, traffic flow, and cooling efficiency in operating its smart city. This is not simple urban automation. It is transforming city operations themselves into an ESG data-based system.
When this transformation takes place, the position of ESG changes completely. It moves from a cost item to an investment criterion. It moves from regulatory compliance to a trust asset. And this very trust is likely to become the most important competitiveness in global supply chains and financial markets going forward.
Through RIE2030, Singapore is designing this change at the national level. It is building a structure in which ESG performance actually functions as a condition for finance, investment, and international cooperation. For example, its sustainable finance hub strategy is not simply a policy for an eco-friendly image. It is a strategy to connect ESG data with finance and draw new capital flows into Singapore.
In the end, it is about changing the structure so that doing ESG well becomes not a "good deed" but a "rational choice." In Korea too, fatigue surrounding ESG is steadily growing. Regulations are increasing and demands are mounting, but companies feel the actual rewards are unclear.
The question, however, is not whether to do ESG or not. It is what structure to place ESG within. The message RIE2030 delivers is clear. ESG did not become a cost because it was originally a cost. It became a cost because it was designed to become one. Change the design, and the role changes too.
In the next installment, I intend to examine how this design is actually implemented. In what way does Digital ESG turn ESG from a cost into an asset? And why is the combination of digital and finance changing the future of ESG? The answer lies precisely within that connecting structure.
