The Financial sector is becoming a strategic driver to force companies to take bigger actions on their environmental and social footprint. The CEO of the world’s largest asset manager – Blackrock, recently spoke out to advise companies that measuring sustainability impact is no longer optional if you look to remain competitive.
“The stock price of a business will depend, at least in part, on companies’ impact on environment and society. Measuring ESG (Environmental, Social and Governance) impact is becoming a critical factor. Listed companies must expect stronger scrutiny on their sustainability practices to increase stock price and value”
– Larry Fink, CEO Blackrock, 18th January 2018.
Turnkey Group wrote this article for businesses to understand how to benefit from strong Environmental, Social and Governance (ESG) credentials to improve bottom line, increase profits and attract investors.
Why is ESG important for companies and investors?
Both Listed companies and investors gain from managing ESG KPIs. We have listed the key benefits for both sides below.
Key Benefits for Listed Companies:
- Improved Risk Management – developing processes to reduce risk and carbon impact
- Cost savings associated with energy, water, waste, carbon efficiency, staff loyalty
- Revenue growth from sales of more sustainable products
- Driving innovation
- Operations optimization – by setting the target to reduce your carbon, you are actually looking at reducing operational costs and manage day to day business better
- Strengthened reputation
- Employee engagement
- Builds ability to win more business (become more competitive)
- Reduce cost of recruitment –sustainability helps to attract and retain talented staff
- Improved visibility to the portfolio supply chain
- Increase company profile for investors
- Improved company valuation and share value
Key Benefits for Investors:
- Optimizing Valuation of Portfolio clients
- Investment and Reputational Risk mitigation
- Strengthen reputation on sustainable investment
- Lower cost access to funds
It can be seen that sustainability best practices are increasingly beneficial to helping companies become more profitable and competitive. With stock exchange mandates making sustainability reporting increasingly transparent and complex, companies who embrace the development of sustainability will be increasingly seen as the new leaders and disruptors in the modern business environment.
Managing the above factors requires more than simply talking about becoming sustainable. It is crucial to manage your processes using verifiable and auditable analytics which showcase and prove your company’s commitment to become sustainable. Leading companies also supplement their data through strong training and education leading to a cultural shift towards sustainability leadership.
Make 2018 the Year of Change
With stock exchange mandates in place, government taxation programmes for carbon in motion, and the growth of sustainable and green bonds on the rise, it is clear that we have reached the point where it is difficult to avoid or push sustainability as a next generation strategy. The ratification of the Paris Agreement by countries in Asia, especially China, has further increased the momentum to ensure companies endorse sustainability commitments and to showcase them effectively. The tipping point appears to finally have been reached.
With all these powerful impact factors to embrace sustainability now on board, expect 2018 to be the year that companies recognize that they cannot afford to be left behind if they have not made a serious commitment up to this point. Even if the commitment does not lead to market leadership, it is essential to make sure you are not seen as a laggard in this important area. The good news is that companies who commit to change have found only benefits, be it in savings, brand value improvement, shareholder and stakeholder loyalty, and an ability to increase methods of generating investment.
See our next article – “Measure your impact – How to use Sustainability analytics and business intelligence to improve corporate performance and brand value”
With Turnkey Group solutions, you can measure and report on your ESG impact more effectively, identify systemic ESG risks in your company, supply chain or investment portfolio and make the most out of your sustainability credentials. Find out more here.
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