Amidst the challenging economic times, businesses must embrace ESG as a component of its growth strategy going forward, according to Anton Colella, CEO at Moore Global.
Research conducted in October 2023 by Moore Global and The Centre for Economics and Business Research (CEBR) revealed that businesses of medium to large size that adopt ESG principles and practices have experienced a 10% increase in revenue over the last four years.
Colella says the survey highlights that “it’s good to be good. In business terms, if you want to run a good business with purpose, it pays off, as well. It also supports staff retention at a time when recruitment is really difficult.”
This view is echoed by Chris Fuggle, global head of sustainability and partner at Mazars who stated that an increase in revenue is due to better customer and stakeholder engagement resulting in the provision of more attractive offerings to the market.
However, Fuggle said many businesses are still struggling to understand the rationale for changes relating to ESG strategy.
“Wanting to change for the good of society helps sets the tone and may link back to a company’s purpose. However, with a plethora of business topics competing for priority, time and resources, it is worthwhile to consider commercial reasons for progressing the ESG agenda too.”
79% of businesses where the importance of ESG principles had increased between 2019 and 2023, reported that customer retention had improved while this compares to only 47% for other organisations, according to the Moore Global data.
Young people desire purpose-led businesses
Moore Global’s Colella argues that there is still an element of “mystery” attached to the benefits of ESG for some businesses.
“Some businesses don’t have experts internally to advise them on the implications or they are maybe unsure where to start, they don’t even know how to do a self-evaluation, and they require some external help to, to do that, even to get off first base.”
A survey conduced by Marsh & McLennan revealed that companies that boasted the highest employee satisfaction exhibited ESG scores 14% above the worldwide average, likely attributable to their robust environmental performance.
Enacting an ESG strategy not only enhances a company’s revenue potential but also “helps massively with staff attraction and retention,” stated Richard Singleton, finance & sustainability director at Menzies.
The younger generations coming into the job market are now looking at businesses that exemplify a positive purpose, with ESG a component of this, states Colella.
“The young people are asking questions, and one of the things is very clear and that is if an organisation proposes to have a certain purpose or value system and there is no of this evidence within a certain period of time, they won’t stay.”
Young people are now more socially aware of who they want to pledge their services to long-term, states Colella. It’s in a company’s best interests to have a clear purpose that will inspire young people to want to work for them.
Intentions behind embracing ESG
Since the arrival of ESG practice, some firms have been caught trying to portray themselves as environmentally friendly when their actions would say otherwise. In 2015, Volkswagen was discovered to have deceived emission tests by manipulating its diesel cars to appear significantly less polluting than their actual emissions.
The publication of greenwashing stories has made firms cautious about what they attempt to communicate to its consumers, says Colella.
“It’s very important for the credibility and the reputation of an organisation that if they say they are doing something, they must be able to substantiate it.”
Menzies’ Singleton stated that it would be ideal for every company to prioritise purpose over profit, but in reality, business owners and leaders are often motivated to pursue change because it ultimately enhances their financial performance.
“I like to think that a balance of people, planet and profit is the most sustainable approach.”
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