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Profit Through Principles
The Financial Benefits Of ESG
Companies that prioritize environmental, social, and governance (ESG) do not see a drop in profit—quite the opposite.
Time and time again, research shows that a strong and effective approach to ESG concerns results in a higher bottom line and fewer risks, thanks to improved mitigation, greater resilience, more accurate alignment with consumer expectations, and increased innovation.
In short, adopting ESG principles benefits the planet, our communities, and your business.
Environmental, social, and governance (ESG) is a series of criteria that evaluate a company’s operations, practices, and performance. Let’s break it down
Environmental
All businesses need energy and resources. The environmental aspect of ESG encompasses a company's energy sources and usage and how these impact the natural environment.
Social
Businesses play a central role in our communities. The social element looks at how a company navigates relationships with employees, suppliers, customers, and society. Things like labor practices, community engagement, and diversity and inclusion fall under the social umbrella
Governance Ethics
Governance is about ethical operations. It assesses your internal practices, protocols, and controls, how you make decisions, and whether you comply with the law and industry regulations.
ESG principles touch every area of your business. Adopting key initiatives can bolster your reputation, reduce risk, and open the doors to new growth and partnership opportunities.
This is more true now than ever. ESG’s importance among stakeholders, investors, and consumers has skyrocketed. Take ESG investing as a gauge—global sustainable investment is now worth over $30 trillion. That’s a 68% increase since 2014 and a staggering 900% increase since 2004.
5 Financial Benefits Of ESG
Embracing ESG principles can result in significant financial gains for your business—both in the short and long term.
Let’s explore five ways ESG can fuel value creation.
Improved Employee Engagement
Employees are the heartbeat of any organization. Their engagement is directly tied to performance, and in the midst of a global talent shortage, attracting and retaining quality team members is integral to your ongoing success and growth.
A strong ESG proposition can help. Companies can instill a collective purpose in their workforce, boosting employee motivation and satisfaction. The social aspects of ESG also shape fair and ethical working conditions that prioritize just compensation and a safe and welcoming environment. One study at an Australian bank found that employees who received bonuses in the form of company payments to local charities reported greater job satisfaction.
How does this impact your bottom line? In addition to an uptick in productivity, employee satisfaction positively correlates with shareholder returns. For example, companies on Fortune's "100 Best Companies to Work For" list yielded up to 3.8% higher stock returns annually over 25 years.
Revenue Growth
A robust ESG proposition helps your company launch into new markets and expand in existing ones, driving revenue growth. Take Neste, a Finnish company, as an example. In the early days, it was a petroleumrefining company. Today, over 90% of its profits come from renewable fuels and other eco-related products.
When authorities and regulators have trust in your business, they may be more likely to grant you the approvals you need to take the next step in your growth plan. You also secure better access to resources, thanks to stronger community and government relations.
In addition, ESG initiatives attract both B2B and B2C customers. You gain consumer preferences, with more customers open to paying extra for sustainable products. McKinsey's research shows that over 70% of consumers will pay an additional 5% for a green product if it performs as well as the non-green alternative
Lower Costs
ESG practices can help you lower the impact of increasing operating expenses, including the rising costs of raw materials and energy. Companies with solid sustainability strategies often achieve higher resource efficiency, reducing power, water, and waste usage in relation to revenue.
Not only does this reduce overheads, but studies suggest that resource-efficient companies experience superior financial performance—there's a clear correlation between resource efficiency and operating profits.
Look Beyond Immediate Operations
True sustainability is embedded in every area of your operations. It's an integral and effortless part of what you and your team do. So, look beyond your immediate operations for areas that could be improved. boost engagement is regular training.
For example, aim for sustainability throughout your supply chain—the practices of your partners and suppliers should align with your goals.
Consider the Process
Sustainability goals are key, but you should also focus on how, specifically, you will achieve those goals. What processes will you implement? Which team members will be involved? Can your existing management systems adapt to meet your organization's changing needs? Integrating sustainability into your processes ensures lasting change by creating a replicable and practical approach.
Sustainable Solutions helps you achieve your goals with simple, tailor-made actions that benefit your business, the environment, and your bottom line.
Get in touch today, and let’s discuss your needs.
