By: David Picton, SVP of Sustainability at Alcumus
Some of the key goals that organisations will set include improved productivity, driving growth, sourcing new skills and talent and making sure operational costs work efficiently.
Rising on the agenda of Boardrooms also means a greater need to make sure your brand image and reputation are effectively managed. In the second blog in our series, we look further into our latest research on ESG (Environmental, Social and Governance) and how ESG integration benefits businesses. Even though traditional organisational goals all contribute to business success, an ‘improved image’ stands out more than ever as the key reward selected by a large proportion of those who took part in the research.
With increased scrutiny from stakeholders, businesses cannot afford to be left behind in their ESG efforts. Those companies who remain standing still will come under rising pressure to not only build ESG strategies into their business operations, but to have a clear focus on looking after their people, improving governance and protecting the planet. ESG is no longer a ‘nice to have’, it is essential to business success and future sustainability.
If you missed it, you can read our first blog on The Business Benefits of Improved ESG Performance. But for now, let’s dive in to the findings.
Integrating ESG and your Business Strategy
For businesses large or small, profitability and remaining competitive are top priorities that help to create value.
That value creation is now incorporating ESG frameworks that inform business decisions, driven by increasing legal requirements and a rising appetite for greater transparency. Each of which are needed to demonstrate how being more sustainable contributes to business success.
Although it’s true that bigger organisations have started their ESG journey much faster, the benefits are also being recognised by smaller businesses and the role they have to play. Those who choose to ignore the rising prominence of ESG now risk their future growth and success.
To understand why ESG is increasingly important, and more global businesses are embracing ESG into how they operate, we conducted research of companies across the UK, US and Canada in 2021, which shows that:
- 60%³ of companies said the greatest benefit reported was an ‘improved image’.
- The key reasons² driving the ESG agenda is due to regulation (55%) and pressure from investors and customers (54%).
- Increased productivity, business growth and lower operational costs, were then stated by 38%, 37% and 36% respectively.
- With a stronger focus on ESG performance, 97% expect to realise further benefits.
- These were cited as improved employee satisfaction (28%); increased productivity (25%); greater access to investment capital (23%); and lower operating costs (22%).
ESG adoption is not an opportunity that businesses can afford to miss. They need to look beyond the
upfront investment that may be seen as a challenge and look further into the future at the mid to long-term benefits, which are significant.
External research also clearly shows the link between adopting ESG performance standards and achieving business benefits:
- Organisations who demonstrate a high level of sustainability and trust (alongside innovation) outperform their industry peers, increasing operating profits by 3.1% and higher returns for shareholders. – (Accenture)
- In the next five years, a strong ESG focus will produce greater shareholder value according to 83% of C-suite leaders and investment professionals. – (McKinsey Global Survey 2020)
- Companies who can prove their ESG adoption to investment professionals can realise a 10% median premium if their business was acquired. – (McKinsey Global Survey 2020)
Are your business practices connected to sustainability outcomes?
ESG is a growing and crucial priority for organisations of all shapes and sizes, whether they are at the start of that journey or much more advanced. Recognising that doing well and doing good go hand in hand has the potential to improve social, economic and environmental outcomes. So, operating in an ethical and responsible way can only benefit your long-term prospects in the process.
Across different industries, sectors and business models, ESG risk management is not as simple as a ‘one-size-fits-all’ model. Organisations should start by determining the specific issues and risks in their own sector or business models, which will help to inform priorities for action.
To make sure your business is investing in more sustainable practices you should focus on these key aspects:
- Driven from the top, where strategy and sustainability are clearly aligned.
- Make sure that compliance comes before competitive advantage.
- Be proactive, ESG shouldn’t start from a reactive position based on the after-effects of a negative situation.
- Use your business case to connect sustainability goals based on metrics that your ESG goals can achieve.
- Assess and improve your sustainability performance with transparent data.
- Include key stakeholders in your programmes who can provide deeper insights, such as governments, policy makers and NGOs.
- Bring your teams into the process to help make sure that sustainability is seen as a core value.
- Continually ask those involved for their thoughts, so you can make improvements, understand what is working well, and the next steps you need to take.
Creating business resilience through ESG
Forward-thinking organisations recognise the need for coherent ESG strategies that build reputation and trust. By engaging in a more meaningful way, business can realise the benefits and opportunities that are available.
Having a strong ESG strategy in place that goes beyond regulatory compliance can add great value to a brand and its long-term prospects. Businesses need to make sure they have ESG data visibility around key risks, which now also include Modern Slavery, Carbon, Waste, Anti-Bribery and Social Value.
ESG and sustainability should no longer be viewed as a future issue. To move forward, successful organisations recognise that the time is now to incorporate a longer-term view of economic issues, environmental performance and social responsibility. The pressure to conform will only continue to rise, so acting more responsibly now will mean the benefits are realised much more quickly.
Find out how our ESG solution can work for your business
About the author:
David Picton is SVP of ESG and Sustainability at Alcumus. Now working with customers across multiple sectors and specialist organisations, he is a former Chief Sustainability Officer and was an original Board member of the Supply Chain Sustainability School. David also achieved the Queen’s Enterprise Award for Sustainable Development, and presented on the benefits of responsible business to the UN’s Conference on Trade and Development.
 Online survey with a sample of 621 businesses (207 in each of US, Canada and UK) conducted between 28 September and 11 October 2021 among senior managers working a role which demands knowledge of ESG or Sustainability requirements or processes for the business