You probably have a laundry list of acronyms to remember that are specific to your company and its line of work. Is ESG one of them?
ESG, or environmental, social, and governance, is emerging as a top priority for many enterprises as they look to meet consumer demand. The world around them is changing and they’re changing with it. Consumers today are making a point to be more deliberate with their cash, and businesses are adjusting accordingly.
79% of US individual investors and 99% of millennial investors are interested in sustainable investing.
But, when it comes to ESG, consumers aren’t the only stakeholders businesses must consider. There are employees, shareholders, Mother Earth herself, and so many more. Whether you’re looking for data to back up your case to the C-suite that ESG is imperative or searching for ways to improve your ESG posture, these trends will help you by painting a picture of ESG today.
What is ESG?
First, let’s outline what ESG considerations look like for businesses in general, but keep in mind these examples are not industry specific.
The environmental component of ESG encourages businesses to pay attention to their environmental impact, including the resources they consume, their contribution to pollution levels, and their efforts to combat climate change. Examples of environmental considerations include working toward carbon neutrality/carbon emission reduction, investment in renewable energy, and corporate investment in green initiatives.
The social component of ESG accounts for the way a company manages its relationship with employees, suppliers, customers, and the communities where it operates—and the policies that affect them. Some examples of social considerations include ensuring ethical working conditions, providing ample employee benefits and fair salary structures, and investing in diversity and inclusion initiatives.
Governance efforts focus on organizational business ethics, regulatory compliance, leadership compensation, audits, internal controls, board makeup, and shareholder transparency and rights.
How ESG impacts businesses.
Regardless of industry, ESG has a stronghold on organizations. To avoid losing out on market share and to stay competitive, organizations are finding ways to orchestrate their ESG efforts. But, ESG can be messy. Regional guidelines and requirements vary, which poses a challenge particularly for businesses with an international reach.
Almost half (49%) of investors say a lack of robust ESG data is “holding back” their organization’s adoption of ESG, according to a new survey of more than 1,000 investors across 16 countries.
To make matters more complicated, ESG data spans departments and teams, and aggregating and reporting on that data requires a fair amount of collaboration. In larger, more mature organizations, that collaboration isn’t always easily achieved.
Nearly a quarter (24%) of companies say that corporate silos are a barrier to ESG progress.
ESG, while challenging for businesses, isn’t something they can simply turn their heads from. Money talks, and data shows that consumers and investors alike are not shying away from doubling down on ESG-friendly companies and funds.
ESG fund assets under management reached $357 billion in 2021, up from $236 billion at the end of 2020. And, ESG investments could become a $1 trillion category by 2030.
Unable to avoid ESG demands, businesses are taking action.
How businesses are responding to increasing ESG expectations.
Conscious of the weight that ESG holds in consumers’ decision-making, organizations across industries are stepping up their ESG tracking and reporting to ensure they can be as transparent as possible. Insurance companies and financial services organizations are great examples of industries that are applying ESG efforts. But with different, constantly evolving regulations across regions, businesses need a way to stay agile.
Executing ESG effectively can help combat rising operating expenses (such as raw-material costs and the true cost of water or carbon), which can positively affect operating profits by as much as 60%.
ESG management isn’t the easiest undertaking, so businesses are turning to technology to help them manage their wealth of disparate data. The better the data is managed, the easier it is for businesses to communicate their ESG efforts and share their progress with stakeholders.
25% of enterprises embracing social and sustainability initiatives say they’re planning to install software to manage their ESG-related activities.
Source: Forrester, Forrester Analytics Business Technographics® Priorities And Journey Survey, 2021.
A comprehensive low-code platform simplifies ESG management by providing a flexible, adaptable solution that seamlessly integrates with existing data repositories. Low-code platforms offer organizations the opportunity to break down corporate silos that hinder ESG management. With data sources seamlessly integrated and cross-functional workflows orchestrated and automated, ESG management is simplified.
Want more info on the latest ESG trends? Check out our infographic, 15 ESG Trends You (and Your Execs) Need to Know.