How embracing ESG can help your business to thrive

While there can be costs associated with implementing ESG policies and processes, there are also many areas where ESG can have a beneficial financial impact. For example, the simple equation of using less and wasting less could easily result in costing your business less too (you can read our articles to see specific examples of how sustainability can lower costs, or how you can save money by reducing waste in your business).

More gains can be made through bringing efficiencies to your logistics. For example, the costs of warehousing can be cut through installing energy efficient lighting, renewable energy systems and better insulation, as well as through optimised layouts and more effective inventory management systems. Route optimisation – and the associated reduction in fuel usage – can also have a financial as well as an environmental gain, as can other ESG wins such as recyclable and reusable packaging.

But it’s not just operating costs you should consider. The costs of complying with various environmental regulations – and the penalties for failing to do so – could be lower too, as could those associated with worker retention (see below) and even those involved in raising capital from financial providers.²

Investment can be essential in building and growing a business, and having a strong ESG foundation could help you to attract it. One reason is because investors are keen to support businesses that make a positive contribution, but it’s also because ESG compliance – and the fact that a business is assessing and mitigating against risk – can increase the potential for securing funding in the first place.³ There’s also research that shows the importance that lenders are placing on it. Almost three-quarters of them (73%) have an ESG lending strategy in place, while 81% say a business’s ESG status will have an increasing influence on their appetite to lend over the next five years.⁴

Many organisations have ESG policies related to the goods they buy, so having strong credentials yourself can make your products more attractive. The EU, for example, has voluntary guidelines designed to encourage public sector organisations to procure goods and services with a reduced environmental impact.⁵ And if you sell to other businesses, bear in mind that they may have their own ESG objectives to meet – and that many of them are using their buying strategy to do so. A survey by Deloitte shows just how procurement is playing a pivotal role in advancing sustainability initiatives, with 85% of businesses saying ESG is the main area where it plays an influential role in decision-making. Its growing importance is also shown by the fact that ESG is now the number two priority for procurement executives globally.⁶

It’s not just consumers and regulators that care about ESG. Employees care too, and having a winning ESG strategy could help you attract – and retain – the workers you want. One global survey shows that almost 70% of employees want their employers to invest in sustainability⁷, for example, while a survey from PwC reveals that 19% of respondents value ESG policies as highly as – or higher – than salary.⁸ And if that’s not enough, a Deloitte survey shows that over a quarter of people (27%) wouldn’t even accept a job before considering their potential employer’s position on sustainability.⁹

Your ESG policy can boost your reputation, build trust, and play a big part in attracting consumers. Why? Because people pay attention to the ethics and sustainability credentials of the products they buy, and their preferences show in their consumption habits. Almost half (46%) say they are buying more sustainable products to reduce their own impact on the environment, according to PwC’s Voice of the Consumer survey, while four-fifths say they are willing to pay more – almost 10% on average – for goods that are sustainably produced or sourced.¹⁰

And it’s not just the goods themselves. Delivery matters too. In fact, one survey suggests that almost half of consumers (45%) say they might prefer one retailer over another if it provides sustainable delivery, while a similar amount say they consider the environmental footprint of delivery to be either important or very important.¹¹

If you want to take advantage of the business benefits that an effective ESG strategy can bring, it’s important to lay some essential foundations when formulating your plan. There’s no one-size-fits-all method – each business has its own needs and capabilities to consider, but there are some useful steps you can think about when putting together your own individual approach. Four of these are:

Developing an effective ESG strategy isn’t easy but it can pay healthy dividends in the form of improvements across the business, from better sales and customer relations to lower costs, greater investment potential and stronger internal loyalty. To further bolster your credentials you could consider certification, which can help show how you are putting your values into action. You can find out more about how to do it by reading our article on ESG certification and the options for your business.

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