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    20 Jan, 2023|

    What is ESG and Why is it Important for Businesses?

    In this post we’ll explain why businesses need to take ESG seriously. And if you don’t yet have an ESG policy, we’ll show you where you can get started.

    What is ESG?

    ESG stands for Environmental, Social and Governance. They are areas or standards of analysis that can help assess and improve a business’s behaviour, impact and performance.

    Why ESG Matters

    Environmental. Social. Governance. These might sound like buzzwords, but these concepts cover a range of issues that can have a direct or indirect impact on your business’s finances.

    ESG reporting might cover certain key issues, including:

    • Resource and supply chain management
    • Organisational health and safety policies
    • Corporate structure, including the process for raising, and responding to, complaints and concerns

    Let’s look at each concept in turn, to assess how it might impact your business, and to give an example of good practice.

    Environmental

    This is essentially a measure of your business’s green credentials. Among other things, you’ll report on your:

    • Energy use
    • Waste generation
    • Pollution levels
    • Natural resource conservation
    • Treatment of animals

    It’s easy to imagine measures that might help a company make improvements here. For example, you might conduct an audit of your energy use. In doing so, you might discover some quick wins that will help you make some huge changes to your energy consumption, such as switching to more efficient lightbulbs, or going paperless to reduce both power consumption and waste generation.

    As we face an ongoing energy crisis, and measure that helps a business reduce their energy use is going to make a substantial difference to their finances. What’s good for the planet is generally also good for business.

    Social

    How does your company treat its people?

    The social criteria assess your relationships with:

    • Employees (including full-time, part-time and temporary staff)
    • Suppliers (including all who work as part of a supply line)
    • Customers
    • Contractors

    Internally, this is about working towards a positive company culture. When members of staff at all levels feel that they can speak their minds, and that their thoughts will be listened to and acted upon, then you’ll have an environment in which good ideas can thrive.

    But the social criteria also assesses how you treat your customers. We shouldn’t need to tell you that any business that commits to good customer service will enjoy a better reputation, which can lead to more sales through word-of-mouth alone.

    On every level, businesses that invest in people tend to outperform businesses that do not.

    Governance

    How exactly does your company conduct its business?

    Among other things, the governance criteria assess your:

    • Leadership
    • Audits
    • Internal controls and communications
    • Executive pay
    • Shareholder rights

    This is all about ensuring transparency and accountability across your organisation. But beyond this, in assessing governance, you’ll also assess how effectively your business can manage its environmental and social commitments.

    How to Create an ESG Policy

    Investing in your ESG policy will identify your business as an ethical institution committed to working in the best interests of your people, your customers, your investors, and the planet. So a commitment to ESG can improve your reputation, which may boost sales and help you secure funding for future growth.

    But as we’ve seen, measures that meet ESG criteria invariably make good business sense. It’s hard to imagine a business making a loss through committing to reducing waste, for example.

    ESG Policy Templates and Resources

    If you want to implement an ESG policy for your business, there are many resources out there that will help you get started:

    If you plan on auditing your business operations, you might also want to assess your current business insurance package. At Anthony Jones, we always have a team of experts on hand who can advise on any of the risks you might face as a business. Contact us on 020 8290 9080, or email us at business@anthonyjones.com.