What are the Environmental, Social And Governance, ESG, principles?
The world has witnessed three previous major industrial revolutions which have harnessed emerging technology to change the way we live and work. The First Industrial Revolution used steam and water to mechanise industry. The second witnessed the invention of electricity and mass production. And, the third was the age of computers and information.
And that includes business. Business is often seen as corrupt or evil, its only interest being itself, its profits, its shareholders, not so much its customers and employees. But that is changing fast too. We’re all too connected now for anything to exist for itself.
You may think these topics are only for investors and big business, but they’re not. Small companies have investors even if it’s just the owner and staff that need to feel they have a sense of purpose too.
Looking after the planet upon which your business operates. For most of us, no all of us, that is still earth. The days of our world of being seen as an unlimited resource for us to plunder are over. Where does your energy come from, or the resources you use to serve your customers? Is the planet being slightly depleted every day you are in business? Consider these things carefully.
The social principles are all to do with you how you treat your staff, your customers, partners and suppliers, anybody who comes into contact with your business. Think of all the things you think you should be doing or would like to do, and you’ve about got it.; paying people on time, recognition, training, coaching, personal development, equal opportunities, being fair and equitable with everyone, this can all help with employee engagement.
The governance principles are all about the management structure, in the main those of the directors, owners and shareholders. It points towards creating a positive culture with the correct values and fair compensation.
So all this makes perfect sense, there’s not much you can disagree with there. These things aren’t generally considered as they don’t help to improve the bottom line when a business is run like a machine when it is very transactional. These things will start impacting your bottom line when they become essential to your customers, employees and suppliers.
How do companies benefit from ESG principles?
When Marks and Spencer implemented “Plan A” for their customers to have a positive impact on wellbeing, communities and the planet they saved $200M annually. Coca-Cola created a competitive advantage when it reduced the amount of water used with its sustainability approach.
All companies of any size can benefit from thinking about how they can operate more efficiently. Working more efficiently increases productivity and profitability, which becomes a competitive advantage.
Your company’s purpose, values and beliefs should be reflected in all that you do. Just considering ESG principles in your decision making is enough to get started. If your staff follow suit, then you’re on your way, nothing will develop a positive working culture better than a shared sense of purpose.
How investors are integrating ESG principles
Investors will consider these aspects of your business too. They’ll want to see you can make a profit while addressing these ideas, especially when your investors are thinking long term. There is not a single way of integrating ESG into your business. Zurich looks at ESG Integration with training, providing information, reviewing processes and the active involvement of the owners.
Is Corporate Social Responsibility (CSR) the same as Environmental, Social And Governance (ESG)?
The term Corporate Social Responsibility has been around for a long time and is vague about what exactly it means. So much so that the term “Green Washing” has come into existence. People generally feel it is only about promoting a brand not doing good.