In recent years, sustainability or ESG (Environmental, Social, and Governance) have become an important consideration for businesses. Clients, customers and investors are recognizing the importance in that way sustainability and ESG practices can directly impact revenue growth and enterprise risk management. Today, we will provide 6 reasons why sustainability or ESG adds value to a business.
Difference Between ESG & Sustainability
If youre wondering the difference between sustainability and ESG, its basically the same. ESG was created more by the investment community, focused into the environment, social and governance categories.
1. Attracting Investors
Sustainability can improve revenue growth by attracting or maintaining investors. According to a report by the Global Sustainable Investment Alliance, global sustainable investment assets reached a record $35.3 trillion in 2020, and that number keeps growing. This suggests that investors see sustainability as an asset and are prioritizing sustainability and ESG when making investment decisions. Investors have realised by investing sustainability their shares leads to more stable, long-term prospects.
2. Improving Brand Image
A company’s brand can be improved with sustainability, which can lead to increased revenue growth. Studied have shown, around 80% of global consumers feel strongly that companies should be more active in reducing their impact on the environment. A significant 73% of global consumers agreed they would change their consumption habits to reduce their environmental impact. By adopting sustainability and ESG practices, companies can appeal to environmentally and socially conscious consumers, and potentially customer loyalty, which can drive revenue growth.
3. Driving Innovation
Sustainability and can drive innovation within a company, leading to new or improved products and services. This can lead to increased revenue growth and market share. Research from Harvard Business School found that companies that invest in diversity and inclusion, and various better leadership practices had higher operating margins and were more likely to outperform their peers over the long term. This suggests that sustainability and ESG practices can drive long-term financial performance and revenue growth.
4. Complying with Regulations
Compliance is the minimum standard that sustainability practices can help companies with reducing the risk of legal action, fines that could damage to the company’s reputation.Sustainability however, goes beyond compliance to integrate better enterprise risk management. Sustainability has shown to expand the definition of project success outside the ‘iron triangle’, often adding long term value.
5. Engaging Employees
Companies that prioritize sustainability are more likely to have engaged employees, and maintain a longer talented workforce. Employees who feel their company is ethical, and is making a positive impact on the environment, society, and their team culture are more likely to be committed to their work. This can reduce the risk of turnover and absenteeism, loss of top talent, knowledge loss and costs of re-training new staff, leading to improved business performance.
6. Mitigating Supply Chain Risks
Supply chains have a number of risks that can be addressed with sustainability practices. By assessing suppliers’ human rights and environmental policies procedures and visibility of their supply chain from tier 1-3, companies can identify potential risks and take steps to mitigate them. This creates collaboration opportunities with suppliers, and reduce the risk of supply chain disruptions and reputational damage.
Conclusion
Statistics and research has been performed to identify if there are benefits to business from sustainability, and the results are positive. Sustainability or ESG practices can improve business revenue growth and risk management, and reduce losses. Companies have the opportunity to attract new investors, improve their brand image, drive innovation, improve compliance and project success, mitigate supply chain risks, and engage employees. Sustainability is already a huge market and still increasing in importance to various stakeholders and companies that fail to prioritize them may be faced with a competitive disadvantage.