Is Environmental, Social and Governance (ESG) a priority for your business?
As environmental impact and social responsibility continue to nudge their way to the forefront of consciousness and agendas, organisations have been taking note and making this their business for a while now, responding to the demand from customers, employees and most importantly for this particular acronym, investors.
Investors, who, let’s not forget, have agendas and beliefs of their own, are interested in investing in companies who support their values, who are prepared and equipped to both weather future demands and positively impact the future. The smart approach to future-proofing your business involves investing in ESG.
While concerns around environmental and social responsibility are perhaps more frequently discussed, governance holds an equal third of the whole. Governance refers to the way in which the organisation is run, how processes are decided and followed, how the board of directors operates and stakeholders are involved in decisions. And this impacts company image, security, commitments to diversity, equity and inclusion (DEI), sustainability practices, recruitment, staff retention and more.
ESG ratings are a way for investors and stakeholders to measure the impact of a business on the world around us and the future.
An organisation’s value is no longer attributed to the same set of standards as it was 20 years ago, the value can now be found, yes, fiscally and through assets and customers but also through sustainability promises and investments, a happy and loyal workforce, a diverse and inclusive environment and their vulnerability to climate change and public criticism.
Going beyond compliance, the key to ensuring that ESG commitment is long-lasting and returns tangible results is to integrate the practices so that they carry each other forward. This is why the 3 ESG aspects work well together as governance impacts, for example, environmental and diversity commitments, a diverse, inclusive and sustainable environment is attractive for future workforces, bringing in and retaining younger generations who drive further environmental practices.
The consumer demand for responsible businesses is a key driver. PWC reported that ESG commitments are driving both customer purchases and employee engagement. 80% of respondents to their 2021 Consumer Intelligence Series survey on ESG claimed to be more likely to buy from a company which stands up for environmental and governance issues and 76% more likely to buy from those who stand up for social issues. Plus, 84% said they would be more likely to work for a company that stands up for the environment, 83% for companies that are socially responsible and 86% more likely to work for businesses with responsible governance practices. Not only are organisations preparing to attract customers and staff, they are also preparing to retain them as PWC also reported that 76% of consumers said they would discontinue relations with businesses who treat employees, communities and the environment poorly.
Socially responsible investing or impact investing is very much a key trend amongst younger investors, who are shaping the future of work. With the use of fintech making investing more widely accessible and managing risk more effective, younger people are investing more regularly, and caring passionately about the future they’re impacting, they’re taking ESG aspects into consideration when adding to their portfolio. 78% of 18-34 year olds stated that ESG considerations affect their investment choices.
Business growth and strategy are hinged on companies’ investment in ESG, and it’s clear that this needs to be more deeply rooted than the need to comply. The business case for this can be made through the clear correlation to tangible gains in profit and investment, customer loyalty and staff retention.