What is ESG, it’s importance and why you should care.
ESG is the sustainability and ethical impact of a company’s operations, and the different aspects of corporate responsibility. These 3 areas can be summarised as:
- Environmental
The impact on the environment through your business activities include resource usage, carbon emissions, waste management, pollution and mitigating climate change. - Social
Relationships with stakeholders include employees, customers, suppliers, and the community. This includes your labour practices, diversity and inclusion, employee welfare, community engagement, and social impact initiatives. - Corporate Governance
Your company’s leadership, structure, and decision-making processes. This encompasses factors such as board composition, executive compensation, shareholder rights, transparency, and ethical business practices.
There are numerous reasons this is important, and giving attention to these areas can provide you with considerable benefit to ensure your long-term sustainability in a continually changing corporate environment.
- Risk Management
Integrating ESG factors into your business practices helps identify and mitigate risks. Proactively managing your environmental and social impacts are better equipped to address potential liabilities, regulatory changes, reputational risks, and market shifts. - Stakeholder Expectations
ESG considerations have become increasingly important to stakeholders such as investors, financial institutions, customers, employees, and communities. Investors are increasingly incorporating ESG criteria into their investment decisions, as are banks and financial institutions through regulatory pressures and legislative change. Both customers and employees are showing a preference for companies that demonstrate responsible and sustainable practices. Meeting these expectations can help you attract and retain investors, customers, and talent. - Competitive Advantage
Embracing ESG practices can provide you with a competitive edge in the marketplace. Companies that demonstrate a commitment to environmental sustainability, social responsibility, and strong governance can differentiate themselves, attract socially conscious customers, and access new markets and partnerships. - Enhanced Reputation
ESG practices can enhance your company’s reputation and brand value. Companies that prioritise sustainability and ethical practices are often seen as trustworthy, responsible, and forward-thinking. This can lead to increased customer loyalty, positive media coverage, and a favorable public image for your company. - Long-Term Sustainability
Embracing ESG practices is crucial for long-term business sustainability. By considering environmental and social impacts, you can future-proof your operations, adapt to changing market demands, and stay ahead of regulatory requirements. This can contribute to enhanced resilience and actually improve financial performance over the long term as we’ve seen through experience.
Now the really important part with ESG you need to know!
You may have heard of the Sustainable Development Goals and the United Nations Paris Climate Agreement. The Climate Agreement is a legally binding international treaty signed by 194 countries, meaning significant measures must have been implemented and taken affect by 2030.
Internationally, the CSRD (Corporate Sustainability Reporting Directive) took effect in the EU in January 2023, mandating ESG reporting in line with the ESRS (European Sustainability Reporting Standards). The ISSB (International Sustainability Standards Board) launched its IFRS S1 and S2 standards in June 2023 to a global audience, providing standardised disclosure requirements for sustainability performance and opportunities, and also for specific, climate related disclosures. From 2024 and the few years following, these are also being incorporated into regulation within Australia that will impact most businesses in the country, starting with the larger companies and those that are publicly listed, with pressures rolling down to smaller companies.
Banks and financial institutions are already feeling the pressure in their lending requirements, which you might have heard they are restricting the industries and companies they will work with.
We see this as opportunity.
It’s an opportunity for our clients to get ahead of the pack. To recognise the risk and the reporting obligations early and address those, whilst identifying new opportunities that can provide long-term benefit and present advantageous changes for both operations, financial improvements and market positioning.
ESG
(ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE)
EXPERTS
Looking at your business and operations through an ESG lens may be new but can certainly be invaluable. One place to start is with an ESG Review and Strategy Plan.
This will provide you with an understanding of what’s coming, how regulatory change will be relevant to your business, and how you might be exposed to risks. You will also have an Action Plan established to help close gaps in your operations and reporting, mitigate risks, and be able to leverage new opportunities that may be presented.
Our ESG services include
(with a focus on the highest return for your ESG investment):
How ESG may impact your business should be identified and managed before it causes you any pain.
If you’d like an ESG Review and Strategy Plan that gives you peace of mind, or simply to discuss how ESG may be relevant to your business and without obligation, fill in the form below and we get back to you.
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