Environmental, social, and governance (ESG) goals align various businesses to a singular framework, encouraging those businesses to improve their performance in terms of sustainability and ethical issues.
It’s not hard to imagine how this benefits society, as the pursuit of ESG goals can minimize and mitigate environmental damage while increasing social benefits.
But how exactly does this benefit your organization?
The Basics of ESG
ESG criteria were created by socially conscious investors, and have been picked up by small and large businesses all over the world. The goal is to provide guidelines and frameworks for business owners to follow in pursuit of environmental, social, and ethical accountability. Brands that pursue ESG goals demonstrate that they’re interested in positively influencing society, or at least mitigating any damage they might do to society.
ESG guidelines typically encourage things like:
- Emission reduction. Some ESG strategies are focused on reducing emissions, thereby reducing the amount of carbon in the atmosphere and mitigating the effects of global climate change.
- Pollution reduction. Generally, environmental goals caution against pollution. Companies can work to reduce direct pollution and mitigate any pollution issues to which they contribute.
- Energy efficiency. ESG guidelines provide direction for overall energy efficiency, giving companies an opportunity to maintain or improve productivity while reducing energy costs.
- Diversity, equity, and inclusion. Diversity, equity, and inclusion (DEI) frameworks are designed to improve social fairness and provide more employment and leadership opportunities to otherwise marginalized demographic cohorts.
- Fair wages and treatment. Social fairness also encourages fair wages and fair treatment of employees.
Adhering to ESG goals can be both time-consuming and expensive since it often requires internal auditing, the introduction of new processes, and consulting with the help of outside experts.
However, the benefits of these investments are enormous – for both societies and for the businesses that make them – which is why so many business leaders are enthusiastic about following them.
How Does ESG Create Value for Your Organization?
These are just some of the ways that ESG creates value for your organization, individually:
- Cost savings. One of the most obvious advantages is cost savings, especially in the long term. Hiring consultants, practicing stricter governance, and making investments can be costly. But in exchange, you can dramatically reduce your energy needs, mitigate potential legal issues, and even build a more productive internal team. Ultimately, this allows companies to save money.
- Public and client trust. Following ESG criteria helps you build public and client trust. In an era where trust is in short supply, people are going to be more likely to gravitate to your brand if they perceive it as practicing environmental, social, and ethical fairness. This can help you win more customers and more clients, regardless of your industry. It’s an especially powerful effect if your competitors aren’t currently pursuing ESG goals.
- Investor appeal. Investors love ESG criteria and the businesses that adhere to them. In fact, it was investors who created ESG criteria in the first place. If you’re interested in drawing more attention from wealthy investors, or appealing to the masses of people likely to buy your stock, pursuing ESG will work in your favor.
- Proactive compliance. Some business leaders like to follow ESG standards because it allows them to practice a form of proactive compliance. We’re not exactly sure what regulations or restrictions are going to come from the government in the future, but we can be reasonably certain that there’s going to be higher pressure on companies to operate more sustainably. Because of this, investing in ESG early serves as a form of future-proofing – and potentially as a way to reduce legal costs.
- Long-term sustainability. ESG is about long-term sustainability. In other words, it’s a way of making sure that your business remains consistently operable in the future, regardless of how circumstances change. If you want your business to last as long as possible, and see the highest possible long-term return, ESG is a no-brainer. These goals are also about creating a better, more sustainable economic environment and preventing the excessive consumption of finite natural resources; accordingly, this is a way of preserving your business’s natural environment. If our environment and economy are totally devastated, no organization will survive.
- Recruiting and employee morale. Following ESG criteria can also aid you with recruiting and building employee morale. People want to work for ethical and conscientious businesses that want to positively impact the world.
A Better Society or a Better Organization?
There are occasionally organizational conundrums that force leaders to decide whether it’s better to make a choice that’s better for the organization or a choice that’s better for society. But with ESG, this dichotomy doesn’t exist. Instead, organizations can make choices that are better both for themselves and for society at large.
Interesting Related Article: “What is ESG? Definition and meaning“