HOW ESG ADDS VALUE TO BUSINESSES

A couple of weeks ago I was lucky enough to be invited to attend an event held at The Shard building in London, where a panel of experts discussed “Will ESG add value to your business?” as part of the launch for a new consultancy, ESG Experts. As I looked out over the industrial landscape of interconnecting railway lines and skyscrapers that make up Bermondsey in South London, I couldn’t help but think it was a fitting setting for a discussion about creating sustainable businesses through policy change, stakeholder demand, and consumer influence.

In recent years, there has been a growing trend in the corporate world towards adopting environmentally sustainable and socially responsible practices. This trend has been driven by an increasing awareness of the negative impact that business activities can have on the environment and society. As a result, businesses are now expected to go beyond simply making profits, and must take responsibility for their impact on the world around them. This is where ESG (Environmental, Social, and Governance) criterias come in.

What is ESG?

ESG is a set of criteria that investors, and other key stakeholders, use to evaluate a company’s performance in terms of its impact on the environment, society, alongside its wider corporate governance procedures. ESG factors can include a company’s carbon footprint, its labor practices, its executive compensation policies, and its overall business ethics. ESG has become increasingly important to investors because they recognize that a company’s long-term success is tied to its ability to operate in a sustainable and responsible manner.

To help businesses navigate this landscape, a group of experts has launched ESG Experts. ESG Experts is a consultancy that helps businesses understand and implement ESG principles. The consultancy provides a range of services, including ESG assessments, ESG reporting, and ESG training. 

How does ESG add value to businesses?

As well as the critical environmental benefits embracing ESG practices bring, there are numerous ways that it also boosts the business’s bottom line.

Companies with strong ESG performance are often more able to access lower-cost capital, as investors are increasingly interested in investing in sustainable and socially responsible businesses. Prioritizing ESG initiatives can also help businesses mitigate risks and avoid costly legal and reputational issues. For example, companies that implement strong environmental policies can avoid fines and penalties for non-compliance with environmental regulations.

In addition, implementing ESG practices such as resource efficiency, waste reduction, and employee satisfaction can help companies save costs and improve their bottom line. Strong ESG performance can also enhance a company’s reputation and brand image, leading to increased customer loyalty and retention.

Businesses that focus on sustainable practices can drive innovation and provide opportunities to develop new products and services that meet the growing demand for sustainable and socially responsible solutions. By prioritizing ESG, companies can adapt to changing market trends, meet evolving customer needs, and create long-term value for both the company and its stakeholders.

Why do I need ESG consultancy?

During a difficult economic period, some businesses may struggle to justify the benefit of ESG consultancy against the bottom line. In reality, without it, an organization’s not-so-distant future growth will hit a (green) ceiling. Some reasons for this are: 

• Businesses that don’t have a handle on ESG are likely to not only be penalized, but will lose out on support and funding from the investor community, resulting in a lack of growth opportunities.
• Consumers are increasingly aware of the impact that their purchasing decisions have on the environment, and society. As a result, they are looking to buy products and services from companies that share their values. This means businesses that can demonstrate their commitment to ESG are more likely to win the trust and loyalty of customers.
• Governments around the world are introducing new regulations aimed at encouraging businesses to operate in a sustainable and responsible manner. For example, the European Union has introduced the Sustainable Finance Disclosure Regulation (SFDR), which requires asset managers to disclose how they integrate ESG factors into their investment decisions. Businesses that do not comply with these regulations may face legal and reputational risks.

How communications supports ESG

As communications professionals, we advise clients on how to navigate different audiences and convey the right message to each. With ESG becoming increasingly important to investors, customers, and regulators, understanding and having a strategy around reporting obligations, what to measure, and how to act on the output of measurement is crucial. Those actions can be communicated externally to inform stakeholders. 

‘Actions’ is the key word in the last sentence. With controversy around both corporate ‘greenwashing’ and ‘greenhushing’ being consistently reported in the media globally, organizations need to ensure their ESG strategy is in place ahead of transparently sharing their progress with internal and external stakeholders.

A panel discussing whether ESG will add value to a business comes at a good time. Businesses that do not have a handle on ESG are likely to miss out on investment opportunities, lose the trust and loyalty of customers, and face legal and reputational risks. 

ESG Experts can help businesses to understand and implement ESG principles, which will enable them to operate in a sustainable and responsible manner. By doing so, businesses can not only protect themselves from risk but also take advantage of the opportunities that ESG presents.

As one of the panelists so aptly put it, “To conclude by answering the question of whether ESG will add value to a business? Of course it will. It just makes sense.”

We look forward to partnering with ESG Experts to help our clients plan and achieve their ESG goals. Reach out here to find out more.