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How can companies maximise the benefits of ESG?
Company shareholders find value in strong ESG commitments.
Growth, profit, and sustainability gave companies a 2% increase in total shareholder return over those that focused solely on financial metrics.
This focus on these three aspects, particularly ESG, has been proven beneficial to these companies in comparison to their competitors, according to a study by McKinsey Institute. And stand out above the rest, here’s how businesses can maximise the benefits of integrating ESG.
McKinsey Institute released a study on how businesses can maximise the benefits of integrating environmental, social, and corporate governance (ESG) in their priorities and work plans.
Make a core strategy that includes growth, profitability, and ESG
Industry leaders don’t just pursue half-baked ESG initiatives on the sidelines. These ESG efforts are integrated into their strategies, along with growth and profitability. From crafting decarbonisation plans, and using recyclable materials, to allowing employees to work from their homes - these can all fall under ESG strategies for companies.
To be more specific, a coal-based business company can shift to materials that follow the energy transition. This can reduce the risk of legal and regulatory interventions whilst improving brand image. If the company further pursues working with indigenous people and local communities, then it will also be able to promote a safer and more inclusive working environment.
Innovate ESG efforts
ESG efforts need not be confined to internal processes, they can also encompass customers and clients who might also have ESG-related preferences or regulatory needs. For example, a logistics provider can help its clients reduce carbon footprint in their supply chain by maximizing technologies for innovation and digitization. The use of these emerging technologies might not only make businesses more appealing to consumers, but can actually result in increasing revenue due to higher efficiency of production and delivery of services.
Commit to transparent ESG reporting
It might take time before companies see returns from their ESG-related efforts, but one thing that may expedite this is being transparent with ESG reporting. This will allow more opportunities for recognition from regulatory bodies. Customers who also commit to a more sustainable and healthy lifestyle might also be more interested in products that are made with consideration for sustainability.
A transparent ESG reporting also encourages more investors to choose a certain business amongst others, especially at times when financial and environmental crises globally change the landscape. With the probability of a chain reaction, other businesses might follow suit.
Plan strategically
Having ESG programs and initiatives is not enough, the management should be able to lay them down in a strategic plan that details the delegation of responsibilities, performance indicators, and goals to be achieved. These plans should also carefully look into the allocation of resources for these programs in the long run.
Whilst trends for growth, profit, and sustainability are always changing, the urgency for these measures remains clear. Regardless of what industry, companies should be more futuristic by investing in sustainable and inclusive growth, not only for financial reasons, but for the nation as a whole.
