What is ESG and why should it matter to business?
These days, everyone’s talking about ESG; it’s a hot topic. But what is ESG, and why should it matter to business?
In short, ESG is about a company being responsible and looking at more than just its financial results. It's about being mindful of how the company operates and the impact it has on the world and the people in it. ESG refers to a reporting framework, a popular set of standards that investors, consumers, employees, and stakeholders can refer to in order to judge how socially and environmentally conscious an organisation is and how well it's governed. It's here to stay!
What does ESG stand for?
ESG stands for Environmental, Social, and Governance. By considering ESG factors, companies can demonstrate their commitment to sustainability by engaging proactively within their local community, reducing risks, and building trust with all stakeholders:
ENVIRONMENTAL refers to whether a company is a good steward of the environment, its environmental awareness and impact, and its efforts to reduce its carbon footprint and drive sustainability.
SOCIAL refers to the company's relationship with society, its social impact, whether they are pro-social, and how they interact with and manage their relationships with employees, suppliers, customers, and their communities.
GOVERNANCE refers to the way a company is run, through its responsible leadership, internal controls, diversity, ethics, transparency, and accountability.
ESG encourages businesses to act responsibly and to be held accountable for the way they operate by looking at behaviors and policies. Companies have been gathering data and information on this subject for years but have not presented it in this way. How a business integrates ESG within its business practices will increase the likelihood of potential investment and consumer buy-in. In a recent study by Deloitte, 93 percent of business leaders said they believe companies aren't just employers but stewards of society.
Businesses can set their own priorities, and some need to do mandatory reporting. However, there are measures out there that organisations can refer to in order to get up to speed. A prominent framework that organisations are looking at are the Global Reporting Initiative (GRI).
Why should businesses care about ESG?
ESG matters for several reasons:
Reputation and brand value: Companies that prioritise ESG issues are perceived as responsible and ethical, which can enhance their reputation and build trust with customers, employees, and other stakeholders. This, in turn, can increase brand value and support long-term performance.
Financial performance: ESG considerations can impact a company's financial performance, as investors are increasingly looking for well-managed companies that have a positive impact on society and the environment. By addressing ESG issues companies can drive innovation, solve local social challenges, increase efficiency, and gain a competitive advantage.
Stakeholder engagement: ESG issues are of growing concern to many stakeholders, including customers, employees, and investors. By addressing ESG, companies can engage with these stakeholders and their communities, understand and address local needs, and, in turn, build stronger relationships.
Regulatory compliance: Governments around the world are implementing new regulations to address ESG issues, such as climate change and sustainability. By thinking about ESG, companies can ensure they are in compliance with these regulations and minimise their exposure to regulatory risks.
Long-term sustainability: ESG considerations are a key component of a company's long-term sustainability and success. By addressing ESG issues, companies can contribute to a better world, reduce their environmental footprint, and create long-term value for their shareholders and society.
In conclusion, by considering ESG factors, companies can create value, build trust, and contribute to a better world.
How can a business address the ‘SOCIAL’ in ESG?
By addressing social issues in a meaningful and sustainable way, businesses can help address local challenges and inequality in the locations where their employees live and work. There are several ways businesses can address the social aspect of ESG:
Community engagement: Businesses can engage with the communities in which they operate by building a strategy around partnering with local initiatives through resource sharing, volunteering, and donating to causes that align with their values and business goals.
Employee well-being: Companies can focus on creating a supportive and inclusive workplace environment by offering opportunities for professional development through community engagement and by engaging employees’ views in a company’s social responsibility strategy.
Supply chain ethics: Businesses can monitor and address social issues in their supply chains by conducting regular audits, implementing ethical sourcing policies, and engaging with more social enterprises and ethically sourced local suppliers.
Stakeholder engagement: Companies can engage with their stakeholders, including employees, customers, suppliers, and local communities, to better understand their concerns and needs and work together to address social issues.
How does Get Synergised help?
Get Synergised is already working with businesses to unlock the 'S' within a business's ESG, the social element of the framework. Through a Discovery Phase, Strategy Phase, and Implemention Phase we take a deep dive into how a business wants to meaningfully engage with its local community and, by producing a clear strategy to do so, together we drive purposeful and responsible business practices aligned to business goals and values.
If you are a business that is serious about finding synergy with your local community and finding out how we can work together, drop me a line; I would love to hear from you.
