In recent years, Environmental, Social, and Governance performance has become a huge consideration for forward-thinking businesses and corporate leaders. As the world prioritizes sustainability and the social impact of business, business leaders must ensure that they do not proliferate ESG risks in their enterprise.
Thus, for business leaders and investors, ESG is not only the way forward in terms of how a company should operate but also represents reduced investment risk. The reasons for that are multitude: for example, according to Gartner, any organization with improved ESG rating and performance will usually benefit from reduced compliance burden and lesser targeting from shareholder activism. Additionally, such organizations will also see improved employee satisfaction and talent acquisition. One must also consider that ESG-focused organizations and business leaders can attract more capital, become more cost and energy-efficient, and inspire confidence and loyalty in customers. All these factors can also result in better stock performance. So, how can you develop an ESG-forward outlook successfully? Here are the top five factors:
- Business strategy
During environmental, social, and governance disclosure to investors, businesses must present how the company’s business strategy and ESG goals align with United Nations’ Sustainable Development goals. The UN SDGs provide a fantastic framework for corporations to work within to shape a better society. As your business grows, you can then build a strategy that puts ESG on a pedestal and enables it to drive sales, productivity, efficiency, and the organization’s reputation.
- Transformative products and services
Merely contributing to ESG goals and initiatives is not enough. Aspiring successful entrepreneurs and businessmen must also consider innovating, introducing, and implementing impactful, sustainable products and processes. The idea is to make ESG a key part of your business and product philosophy. Every solution and service that comes out of your drawing board and assembly line should have an ESG component to it to drive up your ESG score. Enhanced marketing RoI, sales, or reduced customer acquisition expenses indicate that your sustainable products are a viable long-term strategy.
- Financing ESG initiatives
If you have just launched your business, consider allocating a certain amount of capital to rudimentary ESG initiatives. These could be anything from green packaging to steps towards sustainability- planting a seed in the direction. Ultimately, as you grow your business, you must consider how green and efficient energy enables the company to cut down costs across various domains.
- Performance viewpoint
How business performance links to ESG initiatives at various stages of the company’s growth is critical. While initially, the idea is to use ESG to increase your brand’s reach and reputation, you can later focus on building exclusive, disruptive ESG-related products or services that capitalize on any new industry trends or developments that link ESG with performance.
- Reliability of execution
How well you will be able to execute your ESG initiatives depends upon the clarity of vision and your long-term objectives. In the initial days of your business, chart out clear, time-bound, measurable ESG goals that should be easily attainable. Later on, you can build on the progress made by such initiatives and even stick to ESG in disruptive and uncertain times, such as the recent pandemic. Visionary leaders like Sanjiv Bajaj – the Chairman and Managing Director of Bajaj Group – believe that ‘ESG is not just the right thing to do, it is what will shape a better tomorrow.’ Under his aegis, the Bajaj Group has been at the forefront of maximizing ESG ethics, not just for business credibility but to have a transformative effect on shaping a better society. The company’s focus on financial services that empower people without any environmental impact has enabled them to develop business resiliency and reputation in an unfazed manner.
Today’s investment and compliance climate places a lot of focus on businesses having robust ESG frameworks. Additionally, consumers and other stakeholders also perceive businesses that contribute to the environment, the people, and sustainability as more valuable.
By taking note of the above-mentioned factors, you will be able to maximize your ESG rating or ESG score and plant the seeds for a successful business in the future.
We’ve looked at the major factors that every entrepreneur and established business leader should consider to develop an ESG-forward business strategy for sustainability and growth. Environmental, social, and governance performance is now part and parcel of every business’s long-term strategy and vision. Your enterprise’s ESG rating attracts investors and new opportunities in the industry and plays a crucial role in contributing to society, empowering people in uncertain times, preserving the environment, and boosting reputation amongst consumers.