Environmental, Social and Governance (ESG) is a set of criteria to work out how a company affects the environment and general society. ESG also demonstrates how accountable and transparent a company is.
But why should you become an ESG company? We’ll walk you through some reasons on why being ESG-aware could bring a treasure trove of advantages to your business…
ESG broken down
Now you know what ESG means, but what does each area actually mean when broken down?
Some examples may include:
Environmental: Greenhouse gas emissions, resources, climate change, deforestation
Social: Working conditions, community, health/safety, diversity/equality
Governance: Company leadership, audit processes, shareholder rights, board diversity, executive pay
Benefits of becoming an ESG business
Attract customers and clients
If you and your business have ESG values at the forefront of your business, it’s likely that you’ll attract new customers/clients, as well as impress your existing customers and clients. The latest stats show that 76% of customers stop purchasing from companies that don’t help to take care of the environment. Furthermore, 88% of customers feel some kind of brand loyalty with businesses that support social initiatives.
ESG companies are generally seen as progressive and forward-looking. This tends to be popular with the general public as it instils hope in the future and a better environment for the next generation. ESG has the ability to create a long-lasting positive brand image for your business, securing loyal and lifelong customers and strengthening your business over the long-term.
Attracts investors and lenders
From seed investors to business loans, including ESG reporting in your documents is likely to attract more funding if you’re looking for it! More and more investors are actively seeking out ESG-led businesses, especially environmentally friendly and sustainable businesses.
It’s largely believed that companies who are outright socially and environmentally aware and trailblazing new methods tend to be more “low-risk” and a long-term profit source. This includes paying fair wages, equality/diversity in the workplace, using sustainable working methods, preserving the work-life of staff and using clean energy.
As for the “G” of the ESG criteria, the right kind of governance in a business can see it go a long way. A clear governing organisation should achieve more strategic freedom, paving the way for more support from investors, stakeholders and existing shareholders.
Financial makeover
Focusing on ESG objectives has the potential to financially transform a business. ESG helps you hone in on your bottom line. For example, recycling rubbish in the office or using renewable energy can be a fantastic foundation for any business and improve return on investment.
Organisation is another great reason to include ESG factors in your financial reports. You’ll need to track key performance indicators (KPIs) and other metrics to keep abreast of how the business is doing.
A few examples of KPIs for ESG reporting might include:
Environmental: energy consumption, carbon footprint
Social: employee satisfaction, employee pay equality
Governance: bonus pay, board composition
A prime example of a business using ESG to its advantage would be Moneypenny, a B2B communications company. The business focused on ESG factors such as catering to the needs of their employees after the pandemic (e.g. hybrid working, flexible hours, etc) and introduced as many carbon-reducing features as they could to the daily running of the business. As a result, the team increased turnover from £19 million to £48 million. The board also doubled employment to over 1,000 staff in the last few years. Moneypenny also joined the Good Business Charter, developing a compassionate and externally-aware business.
Not only can ESG boost turnover and profit, but it can also help you cut down on costs. ESG reporting can help you get a foothold on your finances and see where improvements can be made. ESG-based research can cut operating costs by as much as 60%.
Global management consulting company McKinsey produced a report on the benefits of ESG. They stated that “the first step to realizing value begins with recognizing the opportunity.” The report found that businesses that make a conscious effort to prevent pollution, for example, tend to have much better manufacturing/strategic/logistical processes and, as a result, higher productivity and lower costs. The paper cites FedEx as a great example of a company directly dealing with environmental factors. FedEx is in the middle of converting its whole delivery vehicle fleet to electric or hybrid alternatives. So far, 20% of the fleet is electric or hybrid – and this has reduced fuel costs by almost 23 million litres (or 50 million gallons).
How can huunuu help you become an ESG company?
Every time we look to make improvements within our own company, our first stop is usually to ask our team for their own views. We give each of our employees a voice and, consequently, our employees feel loyal to huunuu. We’re very much a “practice what you preach” kind of company and we like to think we pass these values onto your business through our trining sessions and products.
We can help your business be prepared. Our wellbeing at work sessions and training encourage good mental health and support. We’re also incredibly adaptable, so we’re a dab hand at helping you evolve your existing business model or helping you find new ways of doing things.
Drop us a message at [email protected] or use our contact form to get in touch to see how we can work with you
