This informal CPD article, ‘The Triple Impact of ESG: Building Trust with Investors, Customers, and Talent’, was provided by Gamma Business Communications, a leading supplier of Unified Communications as a Service (UCaaS) in the UK, German, Spanish and Benelux business markets.
Now more than ever, companies are looking for partners they can trust to prioritise good business practices, people, and the planet. In the UK, the business world is increasingly recognising that doing the right thing for people and the environment is not only a moral imperative but also makes good business sense. And it’s not just the business world: individuals are also basing their employment decisions on their moral and social beliefs. They want to work with partners who share their values around social and environmental responsibility and who are committed to making a positive impact in their communities. So, how can businesses ensure they are meeting the expectations of prospective customers, investors, and employees?
It all comes down to ESG. ESG stands for environmental, social, and governance. It’s a framework for evaluating the sustainability and ethical impact of an organisation. ESG performance is becoming increasingly important to customers, investors and prospective employees, as they are looking for companies that are committed to making a positive impact on the world.
Breaking it down
The Environmental aspect of ESG focuses on a company's efforts to reduce its ecological footprint. What does that involve? Well, it covers things like energy consumption, emissions, waste management, and water usage. Companies with strong environmental performance minimise their negative impact on the environment, contribute to mitigating climate change, and preserve natural resources for future generations. This doesn’t mean there’s ZERO impact – more that the business is doing everything it can to mitigate the impact it does have.
The Social component of ESG covers a number of areas such as a company's relationships with its employees, customers, suppliers, and the communities in which it operates. This encompasses issues such as health and safety, diversity and inclusion, and human rights. Companies that do well in this area create positive work environments, maintain fair and ethical relationships with their stakeholders, and contribute to the wellbeing of the communities they serve. In layman’s terms, it’s not just a lot of pretty words – these companies are really trying to live by the values they profess.
Finally, Governance refers to the way a company is managed and how it makes decisions. This includes aspects such as corporate structure, executive compensation, board composition, and business ethics. Companies with strong governance practices demonstrate transparency, accountability, and ethical behaviour, leading to better decision-making and reduced risk of scandals or legal issues. Obviously, a truly ethical company won’t simply try to avoid legal entanglements – they’ll do the right thing because it’s simply the right thing to do.
So that’s what ESG actually means – where are the benefits when it comes to building trust with investors, customers and employees?
Benefits of ESG Performance
Well, there are several reasons ESG performance is critical to building that trust.
Demonstrating Responsibility: ESG performance shows that a company is taking responsibility for its impact on the environment and society. This can be a major selling point for customers who want to support businesses committed to sustainability, investors looking to put their money somewhere morally sound, and prospective employees looking to work for a company that fits with their personal ethos.