Far from being a fad, there has been a strong demand for ESG that will undoubtedly continue to grow in the coming years.
Environmental, Social, and Governance (ESG) story dates back to 2004 with the UN report entitled “Who Cares Wins”; the report noted that the inclusion of these criteria has a positive impact on financial markets, society and leads to more sustainable performance and better results for communities. Since then, the importance of ESG has grown and the conversation around the topic is not as unusual as before. As the awareness continue to grow, it has been shown to improve the value of companies that show committed to ESG.
Far from being a fad, there has been a strong demand for ESG that will undoubtedly continue to grow in the coming years. In fact, even though Covid-19 has obstructed the transformation to a more sustainable world, the reality is that ESG will be part of the recovery approach.
Why ESG is important for your company. Does it have any advantage? Is it profitable?
Before continuing, let me ask you something. Would you invest in a company that does not care about pollution, deforestation, climate change or does not have any diversity or equal opportunities, fair work conditions? Would you work for a company that does not manage the corruption and bribery? Very Unlikely, is it?
Sustainability is a fundamental part of how to do business. By incorporating ESG, companies are more likely to be successful and generate sensational returns, as they create value for all their stakeholders such as employees, customers, suppliers, and society in general, including the environment.
ESG generates brand awareness and loyalty and this, in turn, generates more returns. It is evident that people today are willing to pay higher prices for products that are environmentally friendly.
Now if we talk about investors, who have become more socially responsible, they want to invest their savings in financial products that not only offer financial profitability but also allow obtaining a series of social returns.
If we talk about employees, people want to be part of companies whose activities reflect their concerns for sustainability. That is why ESG factors should be viewed as a comprehensive investment and a long-term one. Over time, through innovation, resource efficiency, and improved revenue through sustainable products, corporations will finally be able to achieve cost savings and thereby improve their margins. Otherwise, the lack of sustainability in a company could affect its results.
“Every corporation is under intense pressure to create ever-increasing shareholder value. Enhancing environmental and social performance are enormous business opportunities to do just that.” Gary M. Pfeiffer CFO, Du Pont
Do companies need ESG?
We are in a world that is becoming more competitive, interconnected, and globalised every day, ESG factors will become standard practice. The way these are handled will be a crucial part of the management that the company requires to remain competitive in the market. It is evident that companies that care about their employees, customers, the environment and are well managed, will have increased positive brand awareness and corporate social responsibly which can lead to greater competitive advantage.
Responsibility for sustainability is increasing at all levels and has become a great concern for people. Companies now have increased social pressure to not only to generate financial returns but to demonstrate how they are contributing positively to society.
Overall, companies regardless of size, revenue and impact need to consider and implement positive Environmental, Social, and Corporate Governance (ESG) practices to remain competitive, increase employee satisfaction, and to satisfy the changing needs and expectations society has on businesses.
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