6 surprising ways ESG can benefit your business

Many business leaders assume that Environmental, Social, and Governance (ESG) is only for “large” corporations. However, any small or mid-sized business can have a significant impact on sustainability while also cutting expenses, gaining a competitive advantage, keeping talent, attracting investors, and other benefits. Implementing an ESG program might appear daunting, especially for smaller businesses with limited resources. Fortunately, developing an effective ESG strategy is simpler than it sounds, and the benefits garnered are well worth the effort.

What exactly is ESG?

ESG is an opportunity to review and set goals that will favorably impact the environment, improve a company’s social effect on the community in which it operates and the people it employs, and demonstrate how the company is achieving these goals. It is a company-initiated strategy that focuses on the wider picture of caring for people and the environment rather than just the financial bottom line. Nonetheless, studies suggest that organizations with a high ESG rating are more financially successful than those with a low or no ESG rating.

Here are 6 benefits of ESG:

Competitive edge

Having an ESG program in place helps to increase brand recognition and even brand loyalty. Consumers and clients are becoming more aware of ethical purchasing and are more concerned with what a firm does to support sustainability. Small to mid-sized businesses that have made steps to address sustainability concerns (by implementing an ESG program) have been found to attract more customers and clients who want to do business with companies that address these issues.

An ESG strategy can add value to small to medium-sized businesses. It used to be more difficult and time-consuming to track and be consistent with ESG data. Today, ESG data management is made easier by software packages that enable the consolidation of information such as tracking greenhouse gas emissions (GHG), energy statistics, automated data utility management, waste management, and so on.

Cost Cutting

Small to medium-sized businesses can measure critical variables such as energy consumption, water consumption, waste shipping/treatment costs, and raw material utilization by implementing an ESG program. This tracking capability is required for businesses to develop programs to enhance efficiency, which leads to lower expenses related to energy and water usage, as well as trash transportation. ESG initiatives, in addition to enhancing cost management, enable operational efficiency, less exposure to fines/penalties, greater risk management, and enhanced innovation.

More appealing to lenders and investors

One of the most significant benefits of establishing an ESG program is attracting the attention of investors and lenders. No matter where you search for ESG benefits, it appears that investors and lenders are increasingly interested in organizations that have an ESG in place versus those that do not. Companies that prioritize ESG stand out to both investors and lenders because they outperform their competition, according to research after study.

When it comes to investors and lenders evaluating organizations, performance is only the top of the iceberg. Both are increasingly considering ESG performance when deciding whether firms to invest in. To promote this movement, investors and lenders are looking more closely at sustainable enterprises due to increased public concern about climate change and the overuse of natural resources.

A crucial consideration here is that small and medium-sized businesses have an even larger need for loans and money to fuel future expansion and remain competitive in their industry. That means businesses can’t afford to ignore ESG as it grows in relevance as a screening tool for potential investments among investors and venture capitalists.

Enhances Supply Chain

Many organizations are seeking supply chain partners who embrace sustainability activities, just as investors are doing. Many retail outlets, for example, are deciding not to offer products manufactured by companies deemed to have poor ESG performance. Organizations’ supply chains have an impact on the environment, people, and society, so companies that take their ESG goals seriously will seek out suppliers who share the same vision. Several significant corporations have already made the transition to ESG, making it more advantageous for them to collaborate with suppliers who have an ESG program in place, as well as easier to attract partners who rely on higher ESG performance as a condition for cooperation. These issues may be even more important for small to medium-sized businesses. Because a larger firm may possibly replace lost supply chain partners more readily than smaller competitors, smaller companies must be more cautious of the ESG criteria that many companies look for in their partnership selection.

Build a loyal base of customers

It is impossible to overstate the influence of eco-conscious consumers. Customers now more than ever select brands based on their reputation and ESG goals. Customers are giving up brands that don’t reflect their beliefs and are prepared to pay extra for goods from those who do. Authenticity and transparency are crucial when telling tales about ESG initiatives because they may both bring in new clients and strengthen brand loyalty for businesses. Businesses that participate in greenwashing, which involves deceiving the public about an eco-friendly technique or product, risk having their reputations damaged severely when consumers discover their false claims.

Promoting a positive organizational culture

All industries place high importance on attracting and keeping qualified employees, especially in light of recent changes in the labor market. Competitive salary and flexible scheduling are not all that employees desire. They seek employment with organizations that uphold strong ESG principles so they can feel as though they are making a positive impact on society.

Companies can utilize the information in their workforce plans, which will allow them to recruit and maintain a diverse workforce and support equity and inclusion, to improve corporate culture and employee engagement. ESG measures may also improve mentoring programs, direct professional growth, and alter how staff members communicate with one another and with consumers.

Talent Attraction and Retention

Many job candidates nowadays are seeking more than simply a paycheck. They want to love their professions, feel valued, and make a good difference. Working for a firm with strong ESG goals appears to be the most important factor influencing employee job satisfaction, along with proof that the organization “walks the walk” by putting its stated goals into action. According to studies, happy employees work more, stay longer, and strive for higher results. Millennials and Gen Z are rapidly taking over the workforce, and these generations place a larger focus on environmental and social concerns than previous generations, expecting more from their businesses.

Conclusion

Small to mid-sized businesses must compete for their portion of the talent pool, which means they must respect the values of the people in that talent pool. Making and demonstrating progress on ESG will allow them to attract and retain top-tier talent who will only work for organizations that are doing the right thing. Technology exists to reinvent the interaction between business and the environment. By using ESG data, companies are improving their corporate cultures and carbon footprints, and their success is generating increasing interest in sustainability in all sizes of enterprises.