Environmental, Social and Governance (ESG) is something many people have heard of in corporate strategies planning. But why is it important for corporations?
During this pandemic crisis, Sustainability is no longer just about overcoming environmental risks and obstacles but much more about creating resilience against challenges from the ESG factors.
As SGX introduced sustainability reporting on a “comply or explain” basis in June 2016, statements of financial position and comprehensive income provide a snapshot of the present and an account of the past year, while sustainability reports of environmental, social and governance factors show the risks and opportunities within sight, managed for future returns. Such financial and sustainability reports enable a better assessment of the company’s prospects and quality of management.
The value of sustainability reporting is that it ensures organizations consider their impacts on sustainability issues, and enables them to be transparent about the risks and opportunities they face. This way, organizations build trust among customers and all stakeholders which only further emphasizes the importance of incorporating ESG into corporate strategies.
1. Consumers are becoming increasingly aware of the human impact on the environment and the sustainability issues we face
This growing consciousness is leading to the rise of many trends e.g. waste-free living. This shows that products and services which consider the ESG factors can attract more customers as it allows more access to resources which can lower energy and water consumption, reducing costs and their negative impact on the environment. This makes it important for companies to recognize the ESG impacts during design thinking of their products.
2. Sustainable practices can lead to greater social credibility
Being responsible for sustainability issues only makes a company seem more reliable. This can help to attract talents and boost employee morale, thus building stronger community relations. Many people in the sustainability community have also reflected that employers as compared to consumers, employees, governments, should ultimately be the group to take on the lead in sustainability efforts. Employees are expecting employers to step up and nurture this growing interest. As the awareness in sustainability grows, it has become a major factor in job choices as people are willing to accept lower compensation to work for an employer that meshes with their beliefs.
3. Ease in financial access
Having sustainable corporate strategies can lead to government support, subsidies and overcome the increasing pressure from regulatory bodies, improving investor relations. Many companies are experiencing the impact of failing to act on sustainability as countries have been implementing regulations which include carbon taxes. Financial service providers have also integrated ESG rules to avoid unethical lending practices. Hence, companies will have to provide evidence of having developed ESG strategies.
With green bonds raising funds for environmentally beneficial projects (retrofits, clean energy, pollution mitigation, etc.), they offer a safe and predictable rate of return for investors, often at a rate slightly lower than more traditional bonds. Companies can use green bonds in two ways: raising their own funds by issuing a corporate green bond, or by accessing green bonds raised by others. Organizations that access funds through green bonds could allocate internal funds to their capital projects and at the same time fund more activities with environmental benefits. Sustainability professionals also see this as an opportunity, making green bonds and impact investments a hot topic.
In Conclusion!
Through the past decade, the sustainability community has grown tremendously in spreading awareness and making changes. As we believe that every stakeholder has their own part to play in implementing sustainable practices, it is also crucial to collaborate with investors, organizations and government bodies to expedite the process of overcoming stumbling blocks in the ESG factors. Sustainability is no longer an option, but rather, it is the potential to be long-term, meeting our needs without compromising the ability of future generations to meet theirs, and it is the only way forward in our dynamic world.
To find out more about how you and your organizations can learn more about sustainability/ ESG corporate strategies, please check out our 2 Day workshop here https://aventislearning.com/course/corporate-sustainability-esg-strategy/
For more information, please feel free to contact Ms. Germaine at training.aventis@gmail.com/6720 3333
Source:
The Importance of ESG Strategy
