With growing concern surrounding the worsening environmental conditions such global warming, waste disposal, ozone depletion, water pollution as well as social concerns such as modern slavery, consumers are increasingly conscious of the role that companies are playing.
Many businesses have been pledging to achieve net-zero carbon commitments or reducing their greenhouse gas emissions.
Already, 61% of countries, 9% of states and regions in the largest emitting countries and 13% of cities over 500k in population have now committed to net zero (Black et al, 2021). Furthermore, of the world’s 2,000 largest public companies at least 21% now have net zero commitments representing annual sales of nearly $14 trillion (Black et al, 2021).
With the rise of the conscious consumer, it is vital for businesses to have accountability and transparency of the larger picture impacts to society.
The term ESG was coined in 2005 in a landmark study which made the case that embedding environmental, social and governance factors in capital markets makes both good business sense and leads to more sustainable markets and most importantly better outcomes for society.
What is ESG?
Environmental, or the E in ESG includes measuring a company’s resource consumption (e.g, does the business use energy efficiently, is energy obtained from renewable sources, how do they consider resource conservation etc). Environmental measurements encompass the businesses overall efforts to combat environmental degradation with the general understanding that every company uses energy and resources and impacts the environment.
S, social criteria addresses how the company treats the people it interacts with including employees, customers, suppliers as well as the surrounding community. Social criteria also looks at internal policies such as diversity, inclusion, health and safety as well as political ties.
G, Governance relates to the governance factors of decision-making from policy-making and internal practices, controls and procedures adopted in order to make effective decisions and govern itself, meeting the needs of stakeholders.
It is essential for businesses to disclose these non-financial factors to have accountability and transparency of how their company impacts society as a whole. ESG reporting continues to grow in importance as it is viewed as a way to thrive in the present and futureproof businesses from potential risks down the track.
How can ESG policies benefit your business?
A strong ESG is found to correlate with higher equity returns, a reduction in downside risk and higher credit ratings (Henusz, Koller & Nuttall, 2019).
Furthermore, research from Henisz, Koller & Nuttall (2019) found that ESG links to cash flow by facilitating top-line growth, reducing costs, minimising regulatory and legal interventions, increasing employee productivity and finally, optimising investment and capital expenditures. Companies with good ESG scores have also been found to attract better talent and have longer retention as a clear sustainability agenda fosters an internal sense of pride among employees (Beergi, 2022).
Stellar Secure Business Platforms can help – no matter where your business is on its ESG journey.
Stellar improves environmental impact by decreasing resource consumption in 3 ways.
- Electronic documents save paper and help minimise deforestation.
- Green energy initiatives and online/offline capabilities mean that unnecessary power is not wasted.
- Cloud management: Documents are stored in the cloud therefore fewer machines and less hardware is required which translates into lower energy costs.
Stellar’s data security means that employee’s data is kept safe and additionally allows for seamless remote office working. This is important in terms of hybrid working which has greatly increased during the pandemic.
In terms of Governance, Stellar are New Zealand’s experts. Pre/post meeting documentation is key for making processes more efficient and for precise and faster decision making. Stellar’s ability to store information in a centralised environment is important as it is easily accessible for those who have the correct permissions to view it. Users also have the ability to create an agenda for meetings and create minutes which can be edited by the CEO and published in a timely manner. Stellar’s archiving system ensures all supporting documents as well as the minutes and agenda will be stored for historical access.
Businesses must prioritise ESG and adapt to changing demands of different stakeholders. Society is calling for well-functioning businesses that have equitable growth as well as protecting natural resources, look after the internal and external relationships and safeguard consumers interests.
Businesses that do focus on creating strong ESG policies will have accelerated growth, reduced costs and attract better talent.
ESG is more important now than ever before, get in touch with Stellar to see how we could assist your businesses on its ESG journey.