The 5 value creation pathways that ESG opens up


Opinion piece: Johan Hanekom, Sustainability and Innovation at AWS

Regardless of the sector in which your company operates, environmental, social and governance (ESG) concerns will necessarily play a major role in the way it conducts its business. In this article, we tell you why this is a unique opportunity to create more value instead of a challenge.

If you watch it, you will quickly understand why. Environmental concerns are unavoidable because your business operations will be directly and indirectly affected by environmental and environment-affecting factors. Equally important are social concerns – how your business interacts with, affects and is affected by the social dynamics of the communities around it is of extreme importance. Your employees and work dynamics are the first line of social engagement against which your social policies are constantly monitored.

On the other hand, although this article does not focus primarily on this topic, governance concerns are also crucial. Government agencies, the media, and society as a whole will examine how your business complies with laws and regulations, how it handles transparency, and how it views the very concept of social responsibility.

These concerns could intuitively be considered as new obligations to be met, turning into more obstacles to doing business in an already difficult and highly competitive scenario. However, we emphasize that they represent quite the opposite: for example, they play in a truly billionaire opportunity.

30 trillion reasons to spot the opportunity

Over the past few years, sustainable investments have grown exponentially. Currently worth US$30 billion, sustainable investment opportunities and companies attracting capital and investors have grown 68% since 2014.

In a nutshell, in less than 10 years, the sustainable industry – which actually spans multiple industries with companies that are committed to being sustainable – has seen impressive growth that continues to expand. And it’s not temporary either: the economic importance of sustainability will only grow in strength, and it’s time for your business to reclaim some of its strength to grow with it.

The five paths to value creation

1. Leverage social impact to grow

Having a well-structured and well-executed ESG policy is not only good in itself, it’s also good for the company and the way the company rewards it for the concerns it raises pragmatically.

Many companies in different fields, including the complex world of mining, have seen their adherence to clear and tangible ESG policies yield impressive results. From securing more contracts to gaining the trust of government agencies, these companies have seen measurable benefits to their operations precisely because they have delivered measurable benefits to the communities they are close to.

In a more specific context, companies that are strong on ESG can actually close more sales and generate more revenue. Observed consumer behaviors supported by multiple studies show that whenever consumers are presented with sustainable products that perform as well as conventional products, they are willing to prefer them, even when they cost up to 5% more than their regular counterparts.

This leads to more sales and higher profit per sale, forcing even companies that have traditionally operated in socially and environmentally complex scenarios to shift to sustainable products to capitalize on ESG compliance and real policies. proactive sustainable actions that are clearly very rewarding.

2. Waste prevention also reduces costs

What if your company’s customers rewarded you for spending less? It may sound strange, but that’s what the whole concept of waste prevention embodies.

Sustainability-minded consumers – who are dynamically becoming the majority of consumers these days – want to see companies use fewer resources than before. For example, packaging, which was traditionally associated with strong brand image and high costs, has undergone major transformations. Consumers will prefer companies that save on packaging and will reward brands that demonstrate environmental responsibility by reducing their packaging output. In other words, they will pay you to reduce packaging costs, because it also means reducing waste and environmental impact.

But it goes far beyond the packaging. By converting its entire fleet of 35,000 vehicles to electric or hybrid motors, FedEx has managed to reduce fuel costs – and therefore fuel consumption – by 50 million gallons. Consumers applauded it because energy use is an extremely sensitive ESG concern that corporations feel. Reducing energy consumption is therefore as good for the planet and society as it is for your bottom line.

3. Befriend government agencies organically

By simply adopting strong ESG policies that create positive environmental and social impact and demonstrate good governance, companies organically attract government goodwill and trust.

On the one hand, this tends to lead to less intensive monitoring because there is confidence in the good intentions of a company that concretely follows these principles. On the other hand, governments grant more opportunities to companies they see that are committed to helping the world move in the best direction possible, positively affecting multiple actors.

From savings generated by less government intervention and the pressure that this usually entails, to the possibility of receiving grants to support sustainable transitions, depending on the sector in which your company operates, becoming sustainable in a thoughtful way can also pay off big time. this regard.

4. Impact on your workforce

Having an engaged and motivated workforce means having more productive employees who will seek to grow professionally while playing a decisive role in the success of your business.

Several studies show that companies that score highly in employee satisfaction categories consistently sell more, generate higher profits, stronger growth, and better returns for shareholders. Showing your employees that you care about them as individuals and are equally supportive of their career development and strive to make them feel connected to the company is of paramount importance.

At the same time, making your employees feel part of a company that cares about the world it operates in also affects the way they work. Feeling that their work is as good for their careers and employees as it is for society and the planet makes them feel like they belong in something more than just producing a good bottom line.

Companies that are still weak in the ESG area, on the other hand, tend to see a workforce that lacks motivation and a sense of belonging. Companies that outsource many tasks to external teams, losing sight of how these segments interact with ESG goals, also undermine their alignment with sustainability goals that they might otherwise leverage.

This is why large companies with large workforces, which rely on extensive networks of third-party suppliers, seek to follow ESG-focused practices throughout their chains. They know that any weak link in the chain could cause the chain to break, so making sure the chain is intact keeps it strong and seamless.

5. Sow a sustainable culture, reap higher rewards

As you design and execute plans for the future of your business, reassess each new decision from an ESG perspective. Adhering to environmental and social sustainability concerns today will express itself in two very important ways tomorrow: 1) you will avoid the dramatic impact of future burdensome regulatory frameworks for unsustainable business practices, thereby saving on regulatory management forced modifications and limitations; and 2) you will position your business today in a truly sustainable way to benefit tomorrow in several ways: consumers and stakeholders in general pay great attention to the best players in the economy, and they are increasingly interested in supporting them.

Being proactive, however, is the only effective way to track these trends. A wait-and-see approach will be extremely negative as long-lasting trends develop faster than you can imagine. Waiting today to confirm trends and make decisions will mean missing important opportunities tomorrow. Being at the forefront of taking innovative ESG-focused actions today that every stakeholder can identify and appreciate will mean reaping greater rewards tomorrow.

Make it tangible and measurable

Don’t just commit to using words that sound good in your company’s public relations. It is extremely important that you carefully choose tangible ESG objectives for your policy that are clearly related to your company’s industry. It is equally important to make them as tangible and intuitive as possible.

Reducing your company’s plastic or fuel consumption by 30%, or replacing plastic with recycled organic materials in packaging, are measures of change and positive impact that consumers and stakeholders, in general, can clearly observe.

There are many more examples of specific and practical ESG-focused policies that your company can announce and implement, and the value creation consequences that will add to your company’s bottom line are clearly there to be collected. Just keep in mind that the more easily identifiable, verifiable and measurable they are, the greater the impact they will have, especially in terms of the value that your company will derive from them financially.

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