The case for embedding Environmental, Social and Governance into your business

16/08/2019

With an increasing emphasis on both wellness and corporate social responsibility, companies are now more aware than ever of the case for embedding an Environmental, Social and Governance structure (ESG) into an investment portfolio, managed property or business.

Making commitments to protect the environment or consider social value has long been an expectation of large corporate firms, but recent announcements on the state of our international failure to make enough progress towards carbon targets, paired with the worldwide reality of ever increasing habitat loss and corrosion, has caused our society to pause and recognise that many such corporate commitments have not gone far enough.

This shift in the public consciousness has really brought the subject of ESG under the microscope. 

Earlier this year, one of the UK’s largest financial firms said that the lack of action on climate change had caused the business to divest millions from eight separate companies; they also voted against 100 board chairs due to a lack of gender diversity.

Each of the ‘black listed’ firms will need a robust ESG plan in place to tackle these important societal and environmental issues if they wish to attract future investors. This is a good example of how a weak ESG strategy, with low tangible outcomes, impacts on corporate businesses bottom line.

There are many positive benefits of having a robust road map which seeks to improve ESG metrics. These include, but are by no means limited to, improved brand reputation, futureproofing compliance, retaining staff, attracting new clients or tenants, maintaining market leader status and reducing business or asset running costs.

In reality, conducting due diligence on the businesses you wish to work with is of course nothing new, but up until now this has largely applied to financial performance and potential criminal activity.

While all of that remains important, businesses are now far more aware of the social and environmental impacts of their actions. Not aligning with these principles could not only stop potential clients from signing on the dotted line, but also deter new employees from joining the business.

For example, a recent staff survey undertaken by Savills indicated that sustainability and wellbeing in the workplace is becoming increasingly important to employees, especially to the younger generation. Companies now have to be mindful of the changing values of both millennials and generation Z who will make up the majority of the future workforce.

So, finally, can we afford not to do this? As people become increasingly aware of ESG and its influence, can you ignore something that can directly affect your employees, clients and ultimately the perception of your business? The answer is probably not.

 

This article was originally published on the Savills website here