An Environmental, Governance and Social (ESG) Strategy is critical for any business, large or small. Embedding ESG considerations into everyday operations helps organisations to mitigate risk, access funds, benefit from commercial opportunities and attract employees.
We have come a long way from the days when corporate responsibility was considered a tick-box exercise, but if you’re still not convinced, here are just a few ways ESG supports your business to grow in a sustainable way.
Manage Risks
A good indicator of the importance of ESG is the increasing legislation in this area. You might think that new requirements such as the EU Corporate Sustainability Reporting Directive (CSRD) only apply to large international corporates, but the reality is that those corporates will demand ESG data from the businesses in their supply chain, who will demand the same data from their own suppliers, and so on. Everyone in the commercial eco-system must demonstrate the work they are doing on carbon reduction, fair pay, social impact or other ESG priorities – they need to evidence that they are ethical and responsible.
It’s important that businesses are aware – and prepared for – future legislation. More widely, reviewing ESG risks in the context of wider business risks can support the organisation to be more resilient for the long-term.
Investment Potential
If you are going through a funding round or looking to access investment, ESG is a critical component. Investors and lenders are growing more demanding about ESG criteria when making funding decisions.
Socially conscious investors still want to realise returns – but in a responsible way. Businesses that have a focus on ESG are considered to be more future-proof than competitors thus able to provide a long-term sustainable return.
Revenue Driving
A business with good ESG credentials can generate more sales. Any business bidding for public sector contracts must have a Carbon Reduction Plan (PPN 06/21) and be able to evidence how it contributes to the UK target of achieving Net Zero by 2050. Likewise, through the Social Value Act, commissioners of public services must show they have considered social and environmental benefits in the procurement process.
The new UK Procurement Act comes into force on 25 February 2025. It will make it easier for SME businesses to access opportunities, bid for contracts and should also improve payment terms. The act builds on the UK Social Value Act, mandating that contracting authorities consider social value in tenders and take steps to minimise environmental impacts. Businesses who cannot effectively demonstrate their ESG credentials are at risk of losing bids or not having contracts renewed.
For direct-to-consumer brands there is plenty of evidence to show how customers are driven to make ethical choices, the rise in the B-Corp movement can be partly explained by this trend.
Brand Reputation
Perhaps the most important reason to embed ESG in the organisation is – quite simply – that it’s the right thing to do.
If that’s still not enough of a driver, consider the UK Green Claims Code. The code sets out the government guidance for all businesses making environmental claims and aims to protect the rights of the consumer. It can be damaging to a brand’s reputation if it is seen to break the code. It could also be costly – fines might be imposed on businesses who do not meet the guidance and who are seen to be “greenwashing”.
Furthermore, employees want to work for a business that takes its responsibility to People and Planet seriously. They want to feel part of a Business for Good. “Purpose” is increasingly mentioned in recruitment advertising to attract talent to an organisation and keep it there. Given the challenges of recruiting and retaining a talented workforce, doesn’t it make sense to appeal to future employees in this way?
Book a call today to discuss your ESG strategy.
Read more in our dedicated brochure.
