5 Reasons Why ESG Reporting is Critical for Today’s Businesses

The dawn of conscious consumerism has pushed organizations to introduce non-financial factors into their decision-making process. ESG reporting maps the environmental and social impacts while keeping track of governance attributes. Consumers and investors alike have understood the value of businesses holding themselves accountable beyond meeting financial goals. Businesses that do good can achieve sustainable success and create more meaningful business interactions.  

It is predicted that there is currently USD 12 trillion worth of ESG assets managed within the United States with an estimated asset value of $20 trillion over the next 20 years. A 2017 survey conducted by KPMG states that 75% of the largest 100 companies globally are implementing ESG factors, up from 12% in 1993.  

Here is why a growing number of organizations are not only introducing but discussing how they incorporate ESG principles; 

ESG Investing is Good For The Planet  

Over the past decade, news around environmental decline has played a central role. Government agencies play a critical role to minimize future irreparable damage while trying to remedy past damage. It is up to companies at any scale to work with the government to introduce systemic changes to propel a better environmental agenda.  

Introducing paperless offices, using renewable energy sources, and purchasing carbon offsets, may require an initial investment but offers a plethora of long-term benefits for society as a whole.  

ESG Helps Businesses Minimize Risks

ESG factors have made their way into almost every boardroom, the reason is simple; ESG strategy and planning helps companies identify risks at a bird’s eye level. Climate risks for example can craft tumultuous environments to do business in.  

ESG now offers a standard benchmark for investors today, while global standards are in the process of establishment, it is becoming easier for companies to identify the actual costs and benefits of ESG investments in comparison to the outcome of not factoring in the same. 

ESG is Simply Better For Business

Businesses need to pay attention to trends that affect the future of business activities. Concern around ESG behavior is an investment into the long-term sustainability of the organization. When ESG factors are considered including environmentally friendly decision making, the introduction of policies to keep employees safe and content within work environments, and fostering a healthy relationship with governing bodies, these translate down to maximizing revenue through better decision making. 

ESG investment offers stronger returns and proves to the organization that things are well handled internally with proof in both long-term and short-term results.  

Understand The Next Generation of Decision Makers

Gen X, Gen Z, and Millennials are replacing Baby Boomers as wealth holders within the global society. These generations care strongly about ESG factors and an organizations’ ESG reporting standards and performance is going to impact the decisions of these younger investors. The attention directed towards sustainable practices helps guide young investors in taking the plunge. 

Organizations that have neglected this planning need to account for the shift in investment power to ensure their organizations aren’t left behind.   

Global ESG Standards are Quickly Being Developed

Given how widespread awareness of ESG investments is, the need for global standardization around ESG scores is critical. Currently, ESG assessments are conducted relative to other organizations within the field or country. Firms like Sustainalytics and MSCI are helping organizations introduce universal measures to help investors understand the effort and returns around business decision-making.  

These upcoming disclosure standards will help guide internal processes within organizations to propel better ESG aligned practices.  

Conclusion

As ESG practices become standardized across global economies, a majority of organizations will have to adopt ESG strategies to not only stay market relevant but also to retain existing and encourage new customers. Prospective employees are likely to look at ESG compliance to understand whether they are looking for employment within an organization for an extended period and to assess whether employees are treated fairly.  

ESG reporting helps the government understand a business’s contribution to society as a whole, encouraging future benefits such as tax exemptions and government tenders. For businesses unsure of where to start introducing ESG advisory services or ESG consulting would offer professional and practical advice around how to get started. 

As ESG practices become standardized across global economies, a majority of organizations will have to adopt ESG strategies to not only stay market relevant but also to retain existing and encourage new customers. Prospective employees are likely to look at ESG compliance to understand whether they are looking for employment within an organization for an extended period and to assess whether employees are treated fairly.  

ESG reporting helps the government understand a business’s contribution to society as a whole, encouraging future benefits such as tax exemptions and government tenders. For businesses unsure of where to start introducing ESG advisory services or ESG consulting would offer professional and practical advice around how to get started.