ESG, or Environmental, Social and Governance can often be seen as the soft underbelly of business. A series of aspirational, yet vague goals which may appear to have little or no direct impact on ‘hard-headed business’ – especially in today’s competitive environment.
Yet ESG is becoming increasingly important across the supply chain. According to the Confederation of British Industry (CBI) two-thirds of investors take ESG factors into account when investing into a company.
ESG can be a powerful tool and has the potential to unlock benefits for both business and the public. In the United States, ESG focused funds have seen a nearly tenfold increase to $5.4Bn USD in 2021. It is not just in the West that this is true. In Asia managed sustainable fund assets almost tripled to $36.7Bn within one year.
Investors increasingly want to invest in sustainable business models – regardless of the size of the organization. It’s simply good business, and for a number of reasons:
- An ESG strategy demonstrates a mature approach to risk management, including environmental factors, and an awareness of existing or upcoming legislative or regulatory changes in ESG which may directly or indirectly affect production, or sales.
- Companies of any size can improve their reputation by taking a mature approach to ESG. By being open and transparent about the opportunities and the challenges that ESG brings, companies can demonstrate thought leadership, resilience, and vision. ESG thrives upon ethical moral business decisions, and that is deeply attractive to investors.
- At a very fundamental level an environmental waste assessment, can be a lucrative cost-saving exercise. Putting metrics to the types and costs of production, downstream maintenance, disposal and recycling of products or logistic chains and acting upon them can help cut costs across a business. Reducing energy costs through more efficient systems, providers, or green partners, no longer necessarily means more cost, and may in fact offer attractive savings.
- In the 21st century, employees are increasingly attracted to company mission & values. In 2020 millennials represented 40% of the working population, so their views are hugely important in the attraction and retention of employees. Millennials want to join organizations that align with their personal values, with more than three quarters of them view business as a powerful medium for positive social impact. By aligning your business mission and company values and your ESG goals, no matter what size your organization, you can create a powerful culture which is highly attractive.
- Being Diverse and Inclusive should not be a ‘box-ticking’ exercise. Diversifying your workforce can drive better outcomes through fresh perspectives, drawing in new markets, improving customer satisfaction, as well as creating the space for innovation. By linking D&I to your company’s mission, you will target actions and behaviors to align individual and organizational goals to a common path that embraces diversity and capitalizes upon its opportunity.
- For global investors, ESG is now inextricably wrapped up into investment choice, which will create immediate demands and effects up and down supply chains. For smaller companies it is a huge opportunity to have a positive, asymmetric effect upon larger customers and stakeholders, who may not be able to move as swiftly in terms of ESG reporting or requirements, but who can demonstrate diversity and innovative progress through working with smaller organizations committed to change, and with whom they will wish to continue to do business.
For all these reasons, and many more, at Talking Medicines, we have always regarded ESG as an absolutely critical part of growth and development as a business. It guides our approach to doing business, from the way we recruit and look after our people to the way we operate our business and work with our customers. Although we’re still only a small business in relative terms, we’re confident that this approach will help us as we continue to scale. It’s not just the right thing to do for all our futures – it’s the best thing to do for our future company success.
References
https://www.cbi.org.uk/articles/esg-why-smes-should-care-and-how-to-get-started/
https://www.pwc.com/us/en/services/esg/library/diversity-equity-inclusion-reporting.html
The Top 5 Things Millennials Want in the Workplace (benchmarkone.com)
What is ESG? A guide for businesses – British Business Bank (british-business-bank.co.uk)
Shutterstock Image ID: 2114395736
