How Does ESG Bring Value To A Company?

Have you ever wondered why certain companies perform better than others? The answer has three letters, and it is ESG.

Whether you are a startup or an established business organization, ESG reporting and investment is the framework to stay relevant to the current industry trends and practices.

Furthermore, you can even compare the ESG to the radar system that encapsulates everyone in the ecosystem.

What is ESG?

ESG is the abbreviation of Environmental, Social, and Governance. These three are the key components that refer to the factors measuring the sustainability and the ethical impact of the businesses and companies.

How Does ESG Bring Value To A Company?

 

Most investors who seek to invest in companies look at the ESG scale of the company. Therefore, if the company fails to pass the ESG standards, it fails to win over investors for the company.

If we go with the definition, ESG is a generic term used in the capital market. It is commonly used by investors to evaluate the behaviors and future potential of the company.

What falls under ESG?

1. Environmental

It examines how the business performs to safeguard the natural environments. 

It focuses on:

  • Resource depletion.
  • Waste and pollution.
  • Greenhouse gas emission.
  • Climate change.
  • Deforestation.

2. Social

It looks at the social behavior of the company and how it treats other people.

  • Employee relations and diversity.
  • Healthy & Safety.
  • Working conditions.
  • Conflicts.
  • Local communities.

3. Governance

It examines the credibility of the company policies and how the business operations are governed.

  • Executive remuneration.
  • Tax strategy.
  • Donations and political lobbying.
  • Corruption & Bribery.
  • Board diversity & structure.

If you are a company and would like your company to be ESG compliant, contact Diginex. They are an award-winning agency that ensures your company gets ESG complaints.

How Can ESG Bring Value To Your Company?

When it comes to ESG, corporations are looking at it as a business opportunity. These include new markets they can open and sell to, cost reduction, and integrated risk management.

So, what are we waiting for? Let’s dive into it.

1. Top-Line Growth

A strong ESG proposition allows the companies to tap into new markets and expand themselves into the existing market. When the government authorities find that you are doing something for society, they are more likely to be awarded the license, access, and approvals to grasp opportunities for growth.

In addition, ESG can also drive consumer preference. If the consumer finds that the company they are dealing with or investing in is taking action to protect nature and society, consumers show more interest and are willing to pay more to go green.

2. Cost Reduction

Among the many advantages of ESG, one of the major advantages is that it can help you with cost reductions. In addition, executing ESG effectively can help the organization combat rising expenses.

climate change in sustainability reporting

With the ESG, you can see the flow of the expenses and put a lid on unnecessary expenses. This will close the finance lease and significantly reduce business operating costs.

3. Reduce Regularities

A stronger external value proposition can help the organization achieve greater strategic freedom and help ease regulatory issues.

We have seen that most business actions are put to a halt by the government authorities because of many reasons. However, with the ESG compliant business operation, companies can reduce the risk of adverse government action.

4. Boost In Employees Productivity

Just paying a high salary package will not ensure you with talented employees. It is the company’s belief and principle that attracts talented individuals. A strong ESG proposition can help you attract talented employees to the organization.

A recent study shows that positive social action correlates with job satisfaction. With the ESG, you can ensure that your employees feel that they are giving something back to society, making them feel satisfied by what they are doing.

ESG For The Long Term

ESG is a long-term solution for companies that are finding it hard to expand their business. Although ESG alone might help develop your business, it will certainly help remove the restriction from your business.

3 Reasons ESG Reporting Benefits Your Business

Environmental, social, and governance (ESG) reporting can give your business a competitive advantage, help attract and retain the best talent, and slash operating expenses.

ESG refers to a set of standards companies can use to assess their operational performance as it concerns social and environmental impact. On the environmental side, businesses must assess if they negatively impact the environment or have sustainable practices. On the social side, companies must weigh how they interact with workers, clients, suppliers, and their respective communities. And on the governance side, companies must focus on leadership, internal controls and audits, board governance, and executive compensation. 

benefits of ESG reporting for businesses

Having a good understanding of ESG meaning is essential if you want to get ahead in today’s business environment and develop a quality sustainability reporting strategy.

But what specific benefits can your business get through ESG reporting? Here are three benefits.

1. Entice More Consumers

According to a PWC study, 83% of consumers believe businesses should be proactively working on achieving ESG best practices. Consumers are eager to see companies play a more meaningful role in fast-tracking progress on ESG issues like carbon-emissions or waste management. In fact, consumers acknowledge they’ll reward businesses for doing so. 

A concise ESG reporting framework is one example where sustainability reporting can translate into attracting more customers. People are looking for ways to become better stewards of the environment, and want to align with like-minded businesses. Consumers will pay attention when your business uses the right ESG reporting software to disclose performance on concepts like green-energy initiatives. Customers will want to know how these sustainability-related issues inform your company’s business strategy and overall performance.

2. Hire and Hold Onto Top Talent

Another benefit of ESG reporting is that it can help to attract — and retain — top talent. The Great Resignation saw around 50.5 million people quit their jobs last year. It was part of a pandemic-era trend where many people simply felt like the grass was greener elsewhere. 

You might be surprised to learn about the connection between employee satisfaction and employers that take ESG seriously. According to one source, top employers, as determined by worker satisfaction, have average ESG scores that are 14% higher than the worldwide average. Satisfied workers tend to work harder, stick around longer, and strive to produce better results for their employers. The same study adds that businesses that are most attractive to students and young professionals have ESG scores 25% higher than the worldwide average.

When considering the cost of replacing a single worker can range from one-half to two times the worker’s annual salary, you can appreciate the importance of finding and holding onto the right talent. Something like ESG & sustainability reporting can give your business a competitive advantage that attracts the best talent and increases employee retention.

3. Lessen Operational Expenses

One of the benefits of reducing your company’s carbon footprint is there’ll be a corresponding reduction in operational expenses. Your business’ carbon footprint refers to the complete tally of greenhouse gases generated by your company, which includes your employees and your operations. You can do many things to lower your company’s carbon footprint. You can right-size your workforce, optimize routes for fleet vehicles, and cut down on in-person meetings. The more you reduce your business’ carbon footprint, the lower you can cut your operational costs. 

A good ESG reporting platform will give you the insights you need to implement meaningful changes, right when you need them. Considering that the standards for ESG reporting continue to evolve over time, you’ll also want to ensure you have a reporting platform that seamlessly incorporates changes as they occur, like Workiva’s cloud-reporting solution which creates audit-ready, investor-trusted ESG reporting. Using a cloud reporting solution is the only way you can ensure your data is always compliant and up to date.

climate change in sustainability reporting

Start Reporting on Sustainability Today

ESG reporting is essential. If you’re a publicly listed company, there are ESG reporting requirements to be mindful of. But any business that wants to remain competitive and relevant ought to take ESG reporting seriously by developing a sustainability reporting strategy. 

The consumers you rely on want to see ESG reporting disclosures from the businesses they patronize. The only real question for your business is which ESG reporting software to get. Don’t simply select the first one you find, there may be a sustainability reporting solution that can benefit your entire team and will effectively engage your stakeholders. Do some research to find out what’s out there so you can make an informed decision.

Infographic created by Donnelley Financial Solutions, an SEC reporting software
company