Why your organisation needs to manage ESG

Written by Ian Geldenhuys, Programme Director - ESGCloud Team
6 Aug 2020

Turn your company towards success with the right approach to ESG

ESG consists of three distinct pillars: Environment, Social and Governance. These pillars offer immense value if they are managed strategically within the business environment. In fact, there is ongoing research that indicates that ESG makes tangible and measurable business sense. But what exactly is ESG? What has pulled this acronym into financial conversations and investor discussions and why is now the time for the organisation to be paying attention?

Each of the pillars of ESG has criteria against which the business is measured. Environmental criteria usually includes elements such as energy consumption, environmental practices, waste (pollutants et al), resource usage, carbon emissions, climate change approaches, and overall green credentials. The Social elements consist of factors such as relationships, reputation, community engagement, labour relations, occupational health and safety and practices around inclusion and diversity. Finally, Governance focuses on internal controls and regulatory processes that ensure the seamless governance and corporate oversight of the organisation itself. It includes legal compliance, decision making, stakeholder engagement, and overall governance principles.

What further adds depth to the rise of ESG is that each of the three pillars is connected to the other – each one adding value to the other. This means that organisations focused on embedding ESG into culture, governance and ethos will find that excellence in one area will knock into the others and further enhance ESG credentials.

ESG is more than just a collation of concepts and ideals, it has become the benchmark against which enterprises are measured – by more than just customers, but by stakeholders, investors and markets. It is becoming increasingly popular as an investment stance as it can potentially minimise risk while identifying opportunities to deliver competitive returns. It also taps into the growing need for individuals and investors to feel good about the stocks that they own. Many leading organisations such as Nike, Cisco, Kellogg and Microsoft have invested into ESG foundations and this is a trend that’s continuing to grow as more and more companies recognise its value.

ESG has seen significant growth and it is also recognised by executives and leaders as a tool to make a company more sustainable. With a 68% increase in global sustainable investment since 2014, ESG isn’t trendy, it’s strategic. It also delivers stronger business returns, reduced downside risk and improved credit ratings. From its ability to facilitate top line growth to a reduction in costs and an increase in employee productivity, ESG is an opportunity for the organisation to revitalise its internal economy and its market growth.

This is particularly valuable in the current markets. Globally, there is a need to reinvigorate markets and economies, and organisations are looking for sustainable and measurable strategies that allow them to remain stable in mercurial times.

So, who should be paying attention? The answer is – everyone. Regardless of the size of the business or the level of investment or the stakeholder interest, ESG offers a solid platform for sustainable growth. With good governance, strong ethics in people engagement, and rigorous environmental controls, the enterprise is agile enough to pivot in alignment with market, regulation, and customer demand. Paying attention to ESG has become more than just a nod to societal norms or trendy environmental awareness. It is where the agile and capable organisation grows its potential and sustainability, regardless of uncertainty, market complexity and political instability.

ESG delivers measurable business value, improves investment potential, sets standards in governance and good practice, and attracts the right kind of talent. These qualities alone should be putting ESG onto the agenda, right now.

Related perspectives

ESGCloud is a SaaS platform that roots ESG in company performance by connecting ESG effort to competitive strategy and opportunities, and in turn profitability.

The software is innovative and intuitive to use, and features have been created with the end user in mind, making data collection and reporting easy through an all-in-one ESG tool.