Even though the term ESG has been around for a while, during the pandemic it started gaining momentum among policymakers, regulators and investors. This in turn led to an increasing number of businesses looking into incorporating ESG into their strategy and with good reason. The framework allows companies to be more resilient in the face of abrupt changes in the world that can create strong shock waves in business and finance with rippling effects —and this is a scenario we have become all too familiar with in the past 2.5 years.
Here are a few reasons ESG is beneficial for businesses of any size, including small and medium-size businesses:
It helps win more business and adds to top-line growth
ESG allows for easier business expansion as well as entrance into new markets. ESG regulation is changing rapidly and is increasingly facilitating access with licenses and permissions to companies that already have policies in place. Additionally, more than 50% of large company Procurement Officers are actively addressing ESG topics with suppliers.
Consumer behaviour has also changed significantly. According to the Global Sustainability Study 2021, more than a third of consumers globally, approximately 85%, are willing to pay more for sustainable services/products
Regulatory and legal benefits
Businesses with a strong ESG proposition have greater strategic freedom since they enjoy regulatory benefits and have to deal with less scrutiny regarding their overall processes. This creates a positive spillover effect both on the customer and the employee side, which leads to a sustainable brand reputation and less social pressure from activists or lobbying groups.
Financial benefits and investment/asset optimisation
ESG implementation helps companies get funded on better terms. 90% of businesses believe addressing ESG considerations improve their ability to obtain funding.
At the same time, businesses that implement sustainability policies have seen a reduction in costs and enhanced investment returns due to better long-term capital management. Of course, this also helps eliminate risks tied to investments that are bound to suffer in the long run due to environmental concerns.
Talent acquisition and retention, employee motivation & productivity
Last but not least, sustainability concerns have been shown to have a significant impact on talent acquisition and retention. 64% of millennials would not consider employment with a company that is not socially responsible and does not have sustainability policies in place. Moreover, the implementation of ESG policies creates strong company culture and makes employees proud of their workplace.
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