How your ESG performance creates business value

Managing your operations without compromising on safety, sustainability and ethics can make all the difference to your reputation and your bottom line. It’s integral to winning new business, securing investment and shaping better futures.

Failing to act responsibly can damage your company’s long-term prospects and undermine value creation.

In this blog, we explore the latest research on ESG (Environmental, Social and Governance) and the link between ethics and business success.

The focus on ESG strategy is now an irreversible global trend. Organizations are realizing that without meaningful ESG standards, policies and actions, they will struggle to attract customers, investors and employees in the future. 

Why is ESG important? 

Sustainability has emerged as a source of competitive advantage. Studies link consumer choices, employee opinions, investor decisions, media coverage and governmental policies to the sustainability performance of companies.

Here’s why leading ESG-focused companies are capitalizing on this trend:

• 92% of consumers are more likely to trust a company that supports social or environmental issues (Cone Communications LLC: Porter Novelli).
  
• 58% of employees consider a company’s social and environmental commitments when deciding where to work (Cone Communications LLC: Porter Novelli).
  
• 68% of investors have integrated ESG into their investment decision-making and seen greater returns as a result (State Street Global Advisors).
• 9 in 10 now adopt ESG into corporate strategy
  
• Two thirds report a significant business impact
  
• Two thirds already invest in systems and technology to capture data
  
• Half feel deterred from investing more

Our global research of companies across the U.K., U.S. and Canada in 2021¹ found that:

This final point is cause for concern. Strong ESG leadership is required to future-proof your business.

What are the ESG factors to consider?

From achieving net zero targets to promoting diversity, equality and inclusion, ESG considerations are increasingly important to demonstrate that your business can be a force for good while also driving profits.

Key ESG areas include:

Environment 

• Greenhouse gas reduction
• Natural resources
• Pollution and waste
• Biodiversity 

Social 

• Skills investment
  
• Equality, diversity and inclusion
  
• Health, safety and wellbeing
  
• Community impact

Governance 

• Corporate governance
  
• Ethical behaviours
  
• Sustainable procurement
  
• Modern slavery

ESG strategy—what are the challenges?

While ESG impact is more pronounced among larger companies with 250 employees or more, its relevance extends to organizations of all sizes.

• 65% of respondents reported that ESG impact was large or very large.
  
• Among businesses with more than 250 employees, this increased to 73%.
  
• 67% anticipate ESG impact will grow in the coming years.
  
• 53% already have systems in place to assess ESG performance, rising to 57% among larger firms.

Among those without a system in place, 66% plan to introduce one.

However, even with systems and measurement frameworks, challenges remain. These include hybrid working models, accessing data across the organization, supply chain visibility and a lack of necessary tools and technology.

The commercial benefits of an ESG focus 

When implemented effectively, an ESG program balances responsible business practices with commercial performance.

From a value creation perspective, benefits can include:

• Cost savings: Waste reduction, materials optimization, utilities, travel and insurance premiums
  
• Driving sales: Both B2B and B2C customers increasingly consider sustainability in purchasing decisions
  
• Access to finance: Financial institutions are offering ESG-related incentives for borrowing
  
• Meeting expectations: Financial disclosures and verification against public targets
  
• Employee engagement: Recruitment, development and retention

The most successful organizations engage meaningfully with sustainability. They recognize increasing scrutiny from legislators, consumers, employees and investors, along with the financial impact of non-compliance and fines.

An effective ESG strategy is now essential.

Post-pandemic, many organizations are revisiting business models to strengthen long-term resilience. There is a clear focus on building back better, and ESG plays a central role in making that happen.

Sources

¹ Online survey with a sample of 621 businesses (207 in each of the U.S., Canada and the U.K.) conducted between September 28 and October 11, 2021 among senior managers working a role that demands knowledge of ESG or sustainability requirements or processes for the business.