The ever-increasing importance of ESG to business success

The ever-increasing importance of ESG to business success

ESG is becoming an ever-increasing important pillar for businesses of all sizes in many sectors and their success. Its measures are expected to become more crucial to businesses in 2023 and beyond, so now is the time to begin your ESG journey.

In today’s business environment, ESG is becoming a critical component of success, so its implementation should not be treated as merely a check box exercise.

What are the benefits of ESG to business success?

The growth of ESG as a cornerstone for all businesses is anchored in its aim for us all to improve society, the environment and promote a better way of doing business altogether.

The pandemic has played a role in accelerating ESG investment from businesses, having vividly shone a light on many social injustices and issues and kicked both businesses and consumers into action. Research by Accenture of 25,000 consumers across 22 countries found that they have shifted purchasing priorities since the pandemic. More emphasis is placed on sustainability credentials and ESG as a whole as influence on purchasing decisions in addition to price and quality.

From a business continuity perspective, research by Bain has found that companies with weaker ESG performance are less credit-worthy. When reviewing the ESG-risk relationship over time, they found low performers had a doubled risk of being in arrears on loan repayments.

ESG is critical to enhancing customer loyalty, business oversight and positions businesses to be more appealing for lenders and investors – and attracting the best talent. Overall, good ESG principles allow businesses to home in on cost saving opportunities by better managing energy consumption and operational costs a as a whole – thus improving bottom lines.

The landscape is competitive as it is, and with the ongoing economic issues thrown into the mix, increased emphasis will be placed on futureproofing to help negotiate the testing waters which lay ahead. Put simply, business leaders cannot put off investing in ESG as it becomes increasingly more important to business success.

How we can kick off the journey to ESG success as it becomes increasingly more important?

Implementing ESG infrastructure can seem like an additional cost that businesses can do without. The great news is that it is now easier than ever to kick off your ESG journey without forking out thousands in the process.

To make it easier and more cost effective for businesses to assess their ESG credentials, we have teamed up with NatWest to build the free ESG Starter Quiz. This will set SMEs on their discovery journey and allow them to tackle it one step at a time – at a tenth of the typical cost.

The ESG Starter Quiz has been developed from our proprietary analytics using internationally recognised frameworks, which enable all stakeholders to better understand and monitor the resiliency and sustainability of the SMEs they wish to work with, lend to or invest in.

Why the time is now

ESG is critical to the future success of businesses and is becoming increasingly more important. Investment decisions are increasingly taking ESG into account by private equity firms and investors. Additionally, several financial institutions, which are tightening lending, are offering loan facilities at more favourable rates to businesses that are meeting their sustainability criteria.

With the correct ESG infrastructure and practices in place, businesses are more likely to receive injections of capital and lending to help future growth and success, due to the increased importance investors and lenders are placing on it.

As part of its recent Spring to Sustainable Recovery Report, NatWest found that by supporting SMEs on their sustainability journey, the UK economy could benefit from a potential £175 billion in revenue, with over 260,000 new jobs created in the process. Clearly, there are benefits to SMEs and the economy as a whole from implementing better ESG practices.

Moving forward

Sustainability is something many businesses may find both challenging and time-consuming, at a time when there are already several significant pressures elsewhere.
However, in times of uncertainty, businesses need to be able to rapidly effect change and be agile in ever-changing circumstances.

We can’t always predict what’s around the corner, but we can prepare and set up a way to react – the speed at which this can be implemented is crucial. With greater emphasis on good ESG and sustainability credentials increasing from lenders and investors, it’s becoming increasingly important to optimise this. By starting the ESG journey now, you’ll be better set up to adapt and to change but also to futureproof your business for long-term success.

If you would like to learn more about The Disruption House’s ESG assessment, then please get in touch.

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