All companies have a responsibility to try and minimise negative environmental impact, while supporting positive social & societal change.
While ESG is only mandatory for publicly traded companies in some jurisdictions, private businesses that don’t adopt a solid strategy now might be missing a trick – and will be left behind.
The benefits of acting in line with ESG principles can bring tangible benefits to businesses and its stakeholders. Here’s how.
1. Attracting and retaining employees - Research show that the ESG efforts of a business can impact on employee attraction and retention - and that the top employers in these areas have higher ESG scores than their competitors. Employees that feel their employees are acting responsibly and are contributing to a sustainable future are more likely to be engaged and feel a sense of belonging to their company. Engaged employees are happier, more productive employees. Moreover, elements like equity and inclusion are an increasingly high priority for workers.
2. Supporting growth - According to a study by McKinsey, a strong ESG track record can help businesses tap into new markets and opportunities. Trust from governing authorities is likely to bring access, approvals, and licenses that can mean fresh opportunities for growth. ESG is also becoming a big driver in consumer preference providing businesses with a competitive advantage over their competitors.
3. Cost savings - From waste saving to lower energy usage and more agile, effective processes, adopting ESG is bound to make businesses more efficient in many ways – therefore saving spend and improving ROI.
4. Creating customer loyalty - An Accenture study of more than 25,000 consumers across 22 countries showed that the pandemic sparked a realignment of priorities. Buyers are abandoning brands that don't align with their values and are willing to pay more for products or services from companies that do. ESG plays a key role in driving customer preferences – and businesses that don’t embrace it might be left behind.
Want to know more about the basics of ESG? Read our article “ESG in a nutshell”.