More than ever, today’s consumer is focused on sustainability and will choose to patronize businesses that embrace environmental, social and governance (ESG) initiatives. A report from PwC found 80% of consumers said they were more likely to buy from a company that supports the environment, and approximately 85% of employees prefer to work for a company that cares about these issues.
There are a number of ways small- and medium-sized businesses can make ESG-related changes that can move the needle on customer sentiment – and, more importantly, help improve our world. Here is what you need to know about ESG and how it can help boost your business.
What ESG means and how it works together
The goal of ESG is to extend the concept of sustainability beyond just environmental issues – although that is the first “E.” Here is what the acronym stands for:
- Environmental: This includes environmental climate-change impacts related to what a business does in areas such as financial investments, product manufacturing and services as well as how the business operates; for example its energy usage, waste management and building management.
- Social: This pertains to a company’s commitment to diversity, equity and inclusion, its approach to human rights and fair labor practices and its overall focus on customer satisfaction.
- Governance: This puts the spotlight on leadership and board diversity, executive pay and political contribution practices, and the overall absence of lawsuits or internal corruption.
Benefits of ESG
Having a robust plan for ESG initiatives can help companies gain a competitive advantage and top-line growth. Public awareness of ESG has grown significantly, which means that a strong, clear and well-communicated stance on ESG areas most related to your business can allow you to attract and retain stakeholders of all types – including customers, investors and talent. And depending on your industry, it may help support your compliance with laws and regulations.
It also can help companies with investment and asset optimization and create financial value through conservation. Using fewer resources results in cost reductions and less waste, and repurposing materials can even create its own revenue stream.
Sometimes instituting these changes can entail a financial investment, but it can help to document the tradeoffs you find. For example, you might need to raise your pay scale, but those increases might pay off in terms of productivity uplift and additional loyalty that helps you avoid the costs and disruption associated with hiring and onboarding new staff.
And, of course, the biggest benefit is the positive impact these practices have on society and the community at large.
Ways small business can improve their ESG
Many businesses are unsure where to start, but one of the best strategies is to determine your current advantages and weaknesses to help prioritize opportunities. For example, you might already have implemented a successful recycling program so now it would be advantageous to focus on reducing the amount of waste you generate in the first place.
Your company also could implement improved hiring practices by making job postings more inclusive to attract more diverse staff members. One exciting tool is a new prompt in LinkedIn Recruiter called “Diversity Nudges,” which can help identify imbalances in your talent pool and offer suggestions for finding candidates whose profiles help fill the gap.
Another way to make a difference is to select suppliers by viewing them through the lens of diversity, such as working with a women-owned or veteran-owned business. You also can query them on their values to ensure their business practices align with yours.
In the area of governance, you might consider establishing a documented and auditable process for tracking actions and progress on factors related to “E” and “S” and defining who has the roles and responsibilities for ESG actions along with a clear chain of command for ESG oversight and reporting.
Finally, make sure you have created a plan that determines the specific metrics you are going to embrace, then figure out how to measure them so you can assess progress. Recruit fellow employees to help gather ideas and brainstorm implementation practices to ensure the whole company is immersed in the initiative.
Engage all your stakeholders by sharing your efforts and successes
Once you have developed and embarked on ESG initiatives, it’s important to communicate them to stakeholders – and that includes your internal audiences of employees. Without their enthusiasm and participation, it will be difficult to make real strides. For example, you might create a campaign on your internal digital channels, augmented by simple posters near trash cans that remind employees to consider sustainability before they throw something away. Document new processes that reduce waste and train the team on how to adopt them.
Include ESG-related messages in your marketing, such as emails and other outreach you make to customers and clients. You can spotlight associates and suppliers who exemplify these values to showcase efforts and adherence and create additional momentum behind your efforts.
As you track your metrics, communicate your results to amplify your impact. Reports have become commonplace, with more than 90% of S&P 500 companies publishing some type of ESG report. While smaller companies might not have as many resources, take a page from their playbook and peruse examples from larger brands in your category so you can learn more about best practices and different initiatives you might want to pursue.
As society at large becomes more focused on improving our practices in these areas, ESG will continue to dominate business discussions. The time is now to start making changes that will become embedded in your culture and help foster a greater reliance on ESG best practices, leading to a better community for us all.