With so much importance being placed on the global need to reduce carbon emissions, it’s no wonder the finger is now being pointed at businesses to start prioritising ESG.
It can be difficult to make it a priority, especially with so many other plates spinning. And there’s often a misconception that ESG is costly with no financial benefit.
However, infusing sustainability into your business strategy is a valuable way to enhance its reputation and future-proof your business. It’s becoming more obvious that companies that try to cut corners or ignore the need for ESG will be left behind. Commercially, and legally.
Here are 6 reasons why your business should always make ESG a priority:
1. Risk
ESG risks are one of the largest threats a business needs to consider. These cover a broad range, from climate change risks and corruption to health and safety, all of which can significantly impact your reputation and long-term financial performance.
A key example can be seen in the disruption to the energy markets caused by Russia’s invasion of Ukraine. Banks and governments have been forced to speed up the movement of capital to lower carbon sources, and those that relied on the oil supplied have felt the consequences of that risk.
2. Raising funds
Lenders are increasingly implementing ESG screening policies. So, when it comes to gaining capital and raising money, an evidenced sustainability strategy is an essential. Without it, it will be harder to get investments as it’s a greater risk to lend to a business that isn’t clear about their path to Net Zero, for instance.
Having a strategy is no longer enough to stand out from the competition. It’s a minimum expectation for a private company. To gain lender favour, ESG must be deeply rooted in your company’s values, culture and operations.
3. Supply chains
ESG should be a priority because it’s a priority for other companies. You’re part of a supply chain, which is something that is scrutinised for ESG. It’s becoming more common for companies to request ESG information from every company in their supply chain, with the threat of withdrawing business from those lacking strong ESG credentials.
To strengthen and secure relationships with business partners, your company needs to make ESG a priority. But, you also need to consider your own supply chain too, as this will have an impact on your own, Scope 3 emissions.
4. Recruiting and retaining talent
Employees care about and prioritise sustainability too, particularly younger generations like Gen Z and the up-and-coming Gen Alpha. With a growing awareness of climate and social justice issues, it’s no surprise that employees expect their workplace to demonstrate similar awareness and values in their operations.
With remote working as the norm, people have more choice now. So, it’s down to businesses to attract and retain talent by demonstrating an authentic commitment to purpose through actions related to environmental protection, social justice and ethical operations.
5. Performance
Firms with a stronger, committed approach to ESG tend to outperform those that lack one. If a company hasn’t at least started their sustainability journey, they are likely to be perceived negatively by lenders, potential customers and talent. This can create a cycle of performance difficulties, with the potential of limited access to capital and top talent, and therefore, limited resources to compete with your peers.
6. Legislation requirements
While prioritising ESG has always been the right thing to do, emerging regulations mean it’s quickly becoming a legal requirement, too.
This will likely leave many companies scrambling to become compliant with ever-evolving ESG regulations. A proactive approach to ESG won’t only make it easier to stay on top of the continuously updating legislation, it also creates a positive public image to fuel even greater change for good.
If your business has ESG at its core, you won’t face a constant battle to catch up to stay compliant.
Need help getting started?
If you’re unsure where to start with incorporating ESG into your business strategy and keeping pace with the shifting landscape, our ESG Diagnostic Tool can help.
It gives you a holistic view of where your business is currently at, so you can identify gaps and create both a short-term and long-term plan to implement ESG effectively.
If you’d like to find out more, we’d love to chat.
