“Caring for the environment and promoting social responsibility isn’t just a box to check; it’s a mindset that can transform industries and drive sustainable growth. By integrating ESG principles into our core business strategies, we can create shared value for our company, our stakeholders, and the world at large.”

– Indra Nooyi, Former CEO of PepsiCo

ESG has gained significant prominence and, beyond any shadow of a doubt, is becoming a business imperative. than ever, businesses feel the importance of addressing social and environmental issues and driving value creation beyond profits.

But ESG isn’t just another form of compliance in an increasingly regulated corporate environment. ESG is, in fact, good for business. If purposefully integrated effectively into strategy and driven throughout the organisation with clear and courageous leadership, ESG can drive significant growth and even unlock unimagined value.

Below we unpack two main reasons ESG is good for business and how businesses can start driving a meaningful impact and unlock value.


1. ESG is critical to ensuring a company's strategic resilience and future relevance

If the pandemic has highlighted anything, it’s the realisation that we are not masters of our planet but need to be nature’s custodians and society’s guardians. Businesses need to look beyond business-as-usual activities and proactively prepare for potential ESG risks, while at the same time using resources and capabilities to accomplish positive social and environmental change.

In proactively positioning one’s business for the ESG revolution, companies automatically ensure their sustainability, creating strategic resilience and future relevance in an ever-changing landscape. This is not only from a compliance perspective and keeping up with increasing regulatory developments but also from a risk mitigation perspective.

Companies that focus on building a sustainable business model by taking into account their impact on the environment, treating employees and stakeholders fairly, and implementing good governance practices set themselves up for long-term success.

By addressing issues such as climate change, resource scarcity, labour practices, human rights, diversity and inclusion, transparency, accountability, and risk management, companies can build trust with investors and consumers and remain competitive, resilient and adaptable in an increasingly conscious world.

2. ESG as a tool for value creation

Not only is ESG imperative for strategic resilience, but is a bridge between risks and opportunities – unlocking significant value for companies in a variety of different ways:

ESG creates a competitive advantage

Companies willing to take the bold step and embark on the often-uncertain journey of ESG will undoubtedly reap the benefits of a first-mover advantage.

By incorporating ESG into one’s strategy early, companies can set themselves up for a competitive advantage in the market in two ways.

Firstly, by attracting investors, lenders and consumers who are increasingly shifting their attention and capital towards companies with a strong focus on sustainability and ethical values. According to Forbes, 88%[1] of consumers will become more loyal to a company that supports social or environmental issues. This is further supported by the evidence found that 83%[2] of consumers will always choose a brand with a better sustainability record. A global paradigm shift has occurred in which consumers and investors view themselves as catalysts for change and will be more inclined to spend more and invest in sustainable services and products.

It’s not just about attracting from the buy-side. Sustainable practices and responsible and ethical leadership are becoming increasingly important considerations for top talent in considering their next employer.

Companies that thus go beyond reporting and truly integrate ESG into their strategy, culture and operations will reinforce their social licence to operate, and become more attractive to a market that is becoming more focused on sustainable choices.

Secondly, ESG creates a competitive advantage by encouraging business leaders to think differently and innovatively. By embracing divergent thinking in the pursuit of ESG objectives, companies can develop new ways of doing business which may lead to great efficiencies and even unlock unimagined revenue streams.

ESG can improve businesses’ bottom line and drive stakeholder value

Beyond creating a competitive advantage, companies that have an ESG strategy can also improve their bottom line and drive stakeholder value in the following ways:

  1. Improved supply chain management: Incorporating ESG practices into a company’s supply chain can lead to more efficient and sustainable sourcing, which reduces costs and can improve product quality.
  2. Reduced risk: ESG practices can help companies identify and manage risks related to environmental, social, and governance issues. By managing these risks effectively, companies can avoid costly legal disputes, reputational damage, and operational disruptions.
  3. Enhanced employee engagement and productivity: Companies that prioritise ESG are often seen as more attractive places to work by employees, which can improve recruitment and retention rates. Additionally, engaged employees who believe in the company’s mission are more productive and innovative, which can drive business growth.
  4. Improved brand reputation: Adopting ESG practices can enhance a company’s brand reputation and attract more customers interested in sustainable products and services. This can increase sales and customer loyalty, ultimately leading to higher profits.
  5. Access to capital: Many investors are now looking for companies with strong ESG performance and are willing to provide capital at lower costs to these companies. This can reduce a company’s cost of capital and improve its financial performance.

It’s clear that ESG is good for business, but how do businesses practically make a meaningful impact and unlock this value through ESG?

ESG needs to be fully integrated into strategy, culture and corporate DNA

ESG is not something we can switch on or off. ESG needs to be baked into our strategy to focus our everyday operations and drive meaningful impact.

When formulating a business strategy, ESG should not be an afterthought but a critical element to weave into our strategic themes and objectives.

It can be daunting for companies just starting their ESG journey to know where to begin with their ESG strategy, what metrics to track, and how. As with setting any strategy, it’s essential to start with purpose and ambition, understanding the core aspects of your business, what you want to drive and how this links to challenges within the company’s ecosystem.

Importantly companies must remember that with ESG, ‘we can’t boil the ocean’. To help create focus, companies should keep asking themselves key questions:

  1. What is the one thing that will shift the needle from an ESG perspective?
  2. What is practical now, and what can we realistically achieve with our current resources?
  3. How do we balance addressing current challenges and preparing adequately for the future?

Courageous leadership and collaboration: The key to unlocking the true potential of ESG

Importantly, ESG is a mindset change that will drive meaningful impact when incorporated fully into our strategy and culture.

Beyond all else, ESG needs to be proactive and purposeful, and it requires leaders to be brave in the face of an ever-changing landscape and unclear.

To become meaningfully embedded in an organisation and create a valuable impact, there needs to be will and intent to drive ESG values throughout the organisation and embed them in company processes.

Taking the next Step in your sustainability journey:

Remember Warren Buffett’s wise words about the best time to plant trees?

Someone’s sitting in the shade today because someone planted a tree a long time ago”

Well, if you and your business are ready to sow the seeds of meaningful ESG integration and achieve your sustainability goals, our team of experts can help you to navigate your ESG strategy journey. You can find out more about our sustainability offering and get in touch with our team here.

Megan Joscelyne

Author Megan Joscelyne

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