As the climate crisis continues to worsen, governments are developing new environmental regulations that have a significant impact on businesses and their bottom lines. Company leaders have been forced to consider the fundamentals of the business models that once worked well. Now, the focus is shifting to environmental concerns and how to create business value as transitions continue toward sustainability whilst remaining competitive.
So how does a business manage to stay resilient in the light of ESG (environmental, social, and governance) practices? The key is a more holistic approach to sustainability and resilience while adhering to corporate social responsibility.
What is ESG?
A company’s ESG plan works to preserve the world’s natural resources. The plan also shows how the company’s core values relate to investor accountability, equality, diversity, inclusion, corporate social responsibility, and governance.
What does ESG stand for?
Here’s the definition of the ESG:
E: is the environmental criteria used by a business and how it is affected by its environment. Sustainability planning is crucial to this process.
S: is social criteria, which takes into consideration how a company manages relationships with its employees, suppliers, customers, and communities.
G: is for governance, which takes into consideration the internal systems of a company, its stakeholders, controls, and procedures the company has in place to monitor and govern itself, make decisions, and stay compliant with regulations.
Why is ESG important?
ESG is an essential part of a company’s sustainability planning and how to integrate renewable energy into the company’s energy strategy. Tracking carbon reductions is only the start. The last few years have shown that ESG is crucial to investors, consumers, suppliers, and the government. Companies must meet the expectations and regulations of these various segments in order to stay in business.
They must ensure they’re following a sustainability program, while maintaining or scaling their bottom line.
How can ESG and sustainability create business value?
The ESG values and practices a business implements must have a direct impact on the company’s resiliency, sustainability, and the surrounding community. It must also have a direct impact on the global environment and economy.
Those companies that are viewed as “good corporate citizens” tend to make more money than those that are not. But why?
We’ve put together some reasons that ESG can create value for a business:
1. What’s good for the environment is good business
It’s a fact that clean energy is good for the environment, and it makes good business sense. For instance, transitioning to renewable energy helps to reduce costs and energy price volatility while offsetting carbon emissions. This all works to boost the company’s standing in the public arena, which translates into more business.
2. Energy independence
As extreme weather increases, energy price risks also increase. However, if an organisation becomes independent of commercial energy supply sources by generating its own power through renewable sources (or using a community’s renewable energy program), this reduces or even removes the company’s dependence on the local power utility, which helps stabilise energy prices.
The direct impact on the company may even be to save money on business operations.
3. Cost reductions and financial incentives
Governments are increasingly supporting the move to renewable energy to lower greenhouse gas emissions. Some offer financial incentives and assistance programs to businesses taking part in clean energy and net zero emissions initiatives.
To take advantage of these opportunities, it’s essential to have a sustainability plan in place and research the energy opportunities in your area.
4. ESG enables a power return on investment
Investing in ESG initiatives offers a powerful return on investment through increased support from investors and customers. In addition, governments may see an organisation is serious about their sustainability efforts and grant more access, approvals, and licences that bring more opportunities for growth.
5. A strong ESG proposition increases public relations
In addition to receiving more support from the government and investors, a strong ESG proposition also works to increase public relations with clients, customers, partners, developers, suppliers, and more.
With a strong ESG proposition in place, companies can also attract and retain top employees and increase employee engagement with a sense of purpose, increasing overall productivity.
6. Boosting employee productivity
A company with a positive environmental impact makes it much easier to attract and retain top employees. What’s more, an effective environmental program motivates employees with a sense of purpose, which can lead to a boost in their productivity. Employee satisfaction is tied to the returns earned by a business.
On the other hand, a poor environmental record can lower employee job satisfaction and productivity. Environmental issues are important to everyone, and employees who are dissatisfied with their organisations sustainability efforts are more likely to strike, cause worker slowdowns, and more.
Strategies for building a company’s “E” in ESG
Review and embed policies
When a company develops a sustainability plan as part of its ESG strategy, it’s crucial to ensure all goals are reasonable and attainable, supported by data, and communicated effectively through the business. This means all employees need to be educated and involved in the development of policies to achieve reportable, verifiable outcomes.
The heads of each organisation must also ensure their policies coincide with changing environments and regulations.
Optimise operations
In addition, creating and following an authentic sustainability plan is crucial. That means making every effort to reduce waste, measuring outcomes, and searching for innovative solutions while managing costs and keeping business partners accountable.
Be proactive with data
The only way to assess a company’s progress is through effective data collection and management. These must be integrated into the decision-making process. Otherwise, it’s impossible to drive behaviour and meet goals set for an organisation’s sustainability plan.
Engage stakeholders and communicate
Part of an organisation’s sustainability strategy is to keep stakeholders engaged and communicate the company’s progress to them effectively. The strategy must be set with the stakeholders and should include environmental priorities and targets. Not doing so could mean missed opportunities to gain value and goodwill through sustainability achievements.
Summing it up
There’s no question that the “E” in a company’s ESG plan is essential to the success of the business. Being an organisation heavily focused on sustainability also creates new business opportunities that work to increase business success and value.
