Integrating ESG Principles Into Your Business
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ESG — which stands for Environment, Social, and Governance — has been a buzzword for companies trying to implement strategies with little to zero negative impacts for decades. However, following the unparalleled upheaval that the COVID-19 pandemic has caused, ESG has become more integral among business stakeholders.
In fact, according to Reuters, 2021 was a record-breaking year for ESG issues. Studies show that 10% of all worldwide funds are ESG-focused, and almost $650 billion was deposited into these funds just last year.
What’s more, aside from ESG programmes helping keep companies morally and socially aligned, research shows that ESG integration keeps companies more valuable and preferable to consumers and investors alike. Data shows that 75% of consumers will drop brands with low-performing ESG efforts, whilst investor support for better ESG programmes has increased by 32%. With this in mind, businesses should make it a personal and professional priority to integrate ESG principles — here’s how to start
According to WeForum, the leading challenge for ESG integration is the lack of ongoing real-time data. Conversely, data-rich ESG programmes are much more efficient and effective. To optimise data for ESG practises, businesses must first create internal compliance metrics and track risks and controls.
Since this is a tedious and continuous process, it’s best to also invest in tools for this. An example of this is an ESG monitoring software that can collate, categorise, and analyse internal ESG data non-stop, just like SmartHead’s Company Digital Sustainability Profile. When your ESG data is clear and organised, you have a defined starting point from which you can determine how best to reach company-aligned goals.
In the past, another challenge to ESG programmes was the ever-changing goals and definitions. However, as recent issues have become clearly defined priorities (carbon emissions, racism, corruption), it has become easier to determine what solutions must be integrated. Today, many technological innovations can keep businesses sustainably compliant. This is especially true among environmental efforts since reaching net zero emissions by 2030 is a top goal for most regulators.
One way that many businesses are addressing this is by turning to alternative clean energy innovations like solar power. Hoymiles explains how more people are opting for this sustainable energy source because it is cheaper, reduces your carbon footprint, and supports energy independence. Solar power is also a mature technology, so most solar panels and microinverters have long-lasting warranties that protect your investment and add value. This means, that over time, these ESG-aligned techs can future-proof your business, too.
Since the Black Lives Matter and #MeToo movements started gaining mainstream support, consumers and investors have put increasing pressure to see social equality championed from all private and public stakeholders. For businesses, this means there is a bigger expectation to be supportive and proactive, not just performative.
As outlined by Timothy J. McClimon on Forbes, some of the ways in which businesses are expected to stand for equality include hiring from more racial minorities, putting money towards philanthropic projects, and ensuring equal pay. Depending on the scale of your business, your customers, local government, and employees will understandably have an expectation of what you can commit. However, more important than committing is actually doing. To avoid broken promises, start with more modest but impactful initiatives that you can grow from. This will set a course that you can follow and reflect on how serious your dedication is.
The whole point behind ESG strategies is to create a positive change through shared efforts. Hence, it makes sense to partner with like-minded entities. This means working with ethical third parties, cooperating with local governments, and supporting other ESG causes. By ensuring that you’re working with people and groups who have the same goals, you can rest easy knowing that similar practices are being applied at every step.
Only focusing on your own efforts creates a minor and short-lived impact. Hence, when preparing your ESG strategy, find out the strategies of those around you. Currently, it’s pretty easy to identify which companies are most compliant because this is often publicly shared. For instance, another blog post here by Ondrej lists the Top 8 most sustainable companies. These include Osram Licht AG and Siemens AG. In so doing, you can decide early on which partnerships are worth pursuing and which are better off replaced.
Of course, nobody expects businesses to change the world for the better. However, we are at a point in time where everyone is expected to do their part. By integrating ESG practises into your business, you’re doing your due diligence as a responsible company and as an ethical person.
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