ESG is fast becoming a business imperative. From 2019 to 2021, the percentage of institutional investors that implemented ESG approaches rose by 18%.
The E in ESG, environmental criteria, concerns the conservation of the natural world, particularly in terms of energy efficiency and waste management.
The S, social criteria, looks at how your company treats other people and considers the relationships your company has.
Whilst the G, governance criteria, examines how a company governs itself, and focuses on bribery and corruption, executive compensation, board diversity and more.
ESG is effectively ensuring sustainable practices throughout your business and third-party supply chain.
Here are 5 ways that ESG creates value.
1. Top-line growth: Tapping into new markets and expanding into existing ones is easier with a strong ESG proposal. It makes governing authorities more likely to trust corporate actors, giving them the permits and access that provide new opportunities to grow.
2. Reducing costs: Raw-material expenses and other rising operating costs can be tackled by implementing ESG criteria thoroughly – it can influence operating profits by as much as 60%. Reduced regulatory and legal interventions
3. Regulatory pressure can be mitigated with a strong ESG proposal by allowing companies to achieve greater strategic freedom. In fact, a strong ESG proposition can give rise to government support and reduce the chances of unfavourable government action.
4. Employee productivity uplift: With a strong ESG proposal, employees are more likely to have a stronger sense of resolve, making them feel accomplished and overall, increasing productivity.
5. Investment and asset optimisation: A strong ESG proposal would encourage companies to allot capital to sustainable options such as renewables and increase investment returns. It can also assist companies in steering clear of uneconomic investment decisions that will likely not be successful because of longer-term environmental issues.