Business Tips: How and Why You Should Incorporate ESG Into Your Business
Environmental, social, and corporate governance (ESG) is growing in popularity and importance, becoming something that no successful or reputable business can afford to ignore. ESG is a framework used to evaluate a company’s operational performance as it relates to its environmental and social impact. Often mistakenly thought of as only for big companies, ESG standards can be implemented by any size company to make a huge impact on sustainability while also reducing costs, improving brand reputation, retaining talented employees and attracting investors. Learn how to effectively incorporate an ESG plan for your business and the benefits gained from doing so below:
The environmental criteria looks at whether or not a company implements sustainable practices and how they impact the environment. It is recommended that companies start incorporating an ESG strategy with the Environment elements, as they are known to be the easiest to incorporate. Companies can measure their environmental impact by analyzing their energy consumption, the type of materials they use and the biodegradability of them and how much waste your business produces. Once those issues are identified, companies can set goals like reducing their carbon footprint, using more renewable energy and contributing to climate change mitigation.
Environmental sustainability is a key factor in ensuring your business is built to be resilient and sustainable for the long term. This allows you to position your company for risk mitigation and guarantee that your company will not only survive, but thrive in any kind of economy. In addition, establishing environmental practices attracts investors as funders are increasingly looking for companies with sound ESG practices. Investors will want to know that your company is taking action to become more ethical, sustainable, and socially responsible. In fact, according to a 2022 ESG survey by Deutsche Bank’s Chief Investment Office, more than 53% of investors regard climate change as the most important factor affecting their investment decisions.
The social aspect of ESG considers how the company works with and impacts its employees, customers and the community as a whole. Incorporating this into your business involves continuous efforts on social responsibility and ensuring your business is a good environment to work in. This can include initiatives like making donations, doing philanthropic work, and supporting community projects and fair labor practices.
Implementation efforts regarding social responsibility can greatly benefit your business by creating better employee retention and attracting talent. As a sustainable, ethical business, you can create an inclusive culture that empowers employees ensuring more productive, engaged and loyal employees. In addition, this attracts more talent, leading to better recruitment and retention rates as well as lower employee turnover costs. Companies with good ESG practices also benefit from an improved brand reputation. By demonstrating your business’s commitment to ESG you are seen as more ethical, honest and respectable in the eyes of customers, leading to better customer loyalty and an advantageous reputation.
The Government criteria of ESG evaluates a company’s leadership, internal controls and audits, and board governance oversight to determine how well the company operates and how decisions are made within the organization. This aspect is often looked at as the most important part of ESG as purpose drives governance and governance drives everything else. You can start incorporating this into your business by creating discussions and dialogue among senior executives as to what the goals of the company are or should be. Start thinking about how to improve your business, why you want to improve or should improve, what your goals are and what the outcome of achieving those goals would be.
Initiating these goal-driven discussions to evaluate your company can greatly benefit you by unearthing hidden risks and potential opportunities. ESG practices can show you where to mitigate risk and lead to better operational efficiencies and cost savings, resulting in higher profits over time. By understanding the environmental and social goals of the company, you are better equipped to make informed decisions that will benefit your business in the long term. As ESG is becoming increasingly important in the market, companies that embrace these initiatives can climb above their competitors.
Small to mid-sized companies can easily establish and incorporate ESG strategies and reap the benefits of doing so. Adopting this approach within your business will lead to a more ethical, sustainable way of doing business, boost brand image, improve risk management strategies and result in financial benefits. It’s not too late to join the trending sustainability movement. Craft your ESG strategy today to strengthen and transform your company into a sustainable powerhouse.