A strong ESG proposition can create value for organizations and their shareholders, help facilitate top-line growth and reduce costs.
The business landscape has evolved and today, consumers and investors prefer to do business with companies with strong ESG performance as compared to companies whose environmental, social, or governance practices may pose a greater financial risk.
While ESG is increasingly gaining popularity, it is imperative to implement an ESG strategy for a business to stay competitive.
Here are ways ESG can create value for an organization.
Efficiency & cost savings: ESG fosters cleaner and more efficient practices that drive down the organization’s operating costs substantially as well as environmental footprint.
Maintaining & heightening business reputation: An organization’s reputation determines the interest, and investment received from investors, stakeholders, employees, customers and the general public. The ESG engagement information forms opinions of an organization and makes all involved build trust and loyalty. Today, customers are willing to pay more for products from reputable and socially responsible companies.
Fostering innovation: Future markets, policies, and social systems will demand for cleaner and healthier products and services. Effective ESG engagement and relationship building encourages sharing of knowledge, expertise, and values that nurture future innovation.
Attract investment: Organizations with poor corporate sustainability disclosures may often be seen as risky investment propositions. Overall, investors consider ESG investments safer and more stable bets. Investors are looking for ways to generate returns from socially and environmentally responsible companies, so disclosing data around your organization’s impact is a great way to attract interest from investors.
Alignment with industry standards: ESG is quickly gaining popularity with investors and the general public therefore placing so much importance on environmental issues. ESG is becoming the standard and adapting is the next obvious thing to do for businesses.
Integrating ESG into your business strategy
Consumers, shareholders, and investors are demanding greater transparency in business operations hence businesses have to demonstrate open communication and accountability.
Integrating ESG into your business operations is an opportunity to revisit your organization from the ground up and ask those fundamental questions of responsibility, resourcefulness, and community. Not because consumers are emotionally invested in them, but also because it is the right thing to do.
Here are five ESG insights and actions to help you integrate ESG strategies into your organization’s DNA and create a purpose-driven brand.
Embed it into your strategy: While the strategy must retain a level of flexibility, it must also be actionable and measurable to stay on track. Define your ESG priorities with associated objectives, time-bound targets, and key performance indicators to evaluate performance and develop a robust strategy that is integrated into the overall business strategy for the organization.
Get your data right: Having the right ESG data is key to transparent and meaningful sustainable finance. Gather the right information for ESG strategies so as to derive more value by collaborating across a business ecosystem. Build an ESG data strategy in alignment with the business data management policy focusing on data quality and transparency.
Tell your story: Communicate your ESG vision clearly to win consumer, shareholder, and investor support. Develop a method to monitor ESG matters in accordance with a standard reporting framework to stay transparent to ease the journey of those following your sustainability journey.
Be innovative: Organizations should look for ways to transform business models and innovate market-making solutions to move toward the goal. Strengthen operations that can lower carbon emissions by adopting new technologies and sustainable practices.
ESG has quickly gathered momentum in the past years and great strides continue to be made. Businesses must now act to embed ESG into their strategies if they hope to remain ahead of public and regulatory expectations.
By: Meiraj Hussain, Group Head of Support Services, Al Masaood Group, Abu Dhabi