ESG factors are critical for business success as they are a key contributing factor for investors, customers, employees, and other businesses that consider partnering with you. You also have a social responsibility to run a sustainable and responsible company. When you do, you will see growth and a positive impact on the world.
Today, we will look at nine ESG factors your business should consider when making decisions.
- ESG stands for environmental, social, and governance factors.
- Your business will get more investors, attract more customers, and save money when implementing ESG strategies.
- Sustainable sourcing, diversity in the workplace, and caring for employees and customers are critical ways of improving your ESG rating.
What are ESG Factors?
ESG stands for environmental, social, and governance factors that investors use to assess the sustainability and risk of businesses. This standard is growing in popularity as more investors become socially and environmentally responsible in their investments instead of only looking at financial factors.
Here is a closer look at the three components of ESG.
- Environmental factors are how the business affects the environment through criteria like waste, pollution, climate control, and energy consumption.
- Social impact is how a business cares for the people it impacts, including employee safety and care, human rights, labor standards, customer care, and privacy protection.
- Governance ESG metrics measure whether a company is run in a way that remains accountable, inclusive, and transparent.
Image from CFA Institute
Why are ESG Factors Important for Businesses?
ESG has become more than just reporting for ESG investing in recent years. It is now a globally recognized standard used by CEOs, employees, and consumers when making decisions or aligning with companies. In addition, addressing key ESG issues in business comes from a renewed worldwide desire to care for the earth and society through ESG sustainability.
Recently, investors and businesses have identified new risk factors such as climate changes, increase in natural disasters, new diseases, security breaches, and human rights violations. These global issues are on the rise, which is why businesses are reevaluating how they operate and measure success beyond revenue and the bottom line.
9 ESG Factors that Will Change How You Do Business
If you are ready to join thousands of other businesses in being a force for good, here are nine ESG factors to rethink in the way you do business.
Global businesses are uniting to conserve the environment from depletion and exploitation. Investors have already pledged more than $130 trillion in public and private investments to fight climate change. Here are three environmental factors you can consider in business to help protect the earth.
Your business can reduce its water, air, and ground pollution by examining how it operates throughout the supply chain. You can begin with the manufacturers of raw materials that often emit tons of carbon emissions. This year, the world already emitted nearly 43 billion tons of CO2.
Instead, consider switching to more fuel-efficient or renewable energy manufacturing companies. Also, consider the products you use within your business. For example, simply switching one-use items like paper products in the staffroom for reusable products can save your company money and reduce paper waste pollution.
Resources are essential to running a business. However, the type and number of resources you use are up to you. Many companies are finding innovative ways of using fewer resources for the same result while also saving their business money.
For example, LED lighting consumes at least 75% less energy and lasts 25 times longer than incandescent lighting. Other businesses allow telecommuting to reduce the need for running an office building. In addition, unplugging appliances at the end of a workday can save energy often lost in electrical leakage.
3. Natural Resources
Businesses can get caught up in their end products and services that they aren’t always aware of the natural resources they used along the way to produce that item. You can reduce your environmental impact by sustainably sourcing your raw materials, recycling unused products instead of creating new products, and finding more eco-friendly replacements for limited materials.
Your social factors will improve the overall quality of life of those affected by your business – reflecting positively on you as a company. Consider these three factors when making socially positive changes in your industry.
4. Labor Standards
Your employees are the most important social elements within your business and should be a top priority when rethinking constructing a socially responsible organization. Taking care of your employees includes:
- Fair pay
- Competitive benefits
- Health and safety regulations
- Educational programs
Also, consider secondary relationships within your company, such as people along your supply chain. For example, using materials with the Fairtrade symbol means the item was created while adhering to international standards of safety, protection, and responsibility.
5. Customer Protection
Your customers also deserve respect and protection. You can show consumers you care about those that interact with your business by treating them with personalized care, protecting their privacy, and listening to their needs.
6. Diversity and Inclusion
Companies that invest in diversity see 2.3 times higher cash flow per employee than those that don’t. Additionally, diverse management can increase a business’s revenue by 19 percent.
Diversity and inclusion in the workplace ensure more people are represented in leadership and steps are taken within the office to support specific needs, such as flexible work schedules for employees with child-care obligations.
The way you run your business reflects your company’s values – which is why you must invest in open and honest business practices to show customers and investors that you are a company they can trust.
7. Moral Standards and Transparency
What are your company’s values, and are you adhering to them?
Your values are a list of ethical standards your business strives to meet in its operations and interactions. Some examples of company values include integrity, commitment, and responsibility. You can live out these values by caring for your employees and customers.
Transparency is one of the most critical moral standards as that is how your business stays accountable and avoids corruption.
Image from HubSpot
8. Strong Business Structure
Quality management ensures your company succeeds while using the best business practices. It includes a diverse leadership with no conflicts of interest, so they can make decisions based on what is best for the entire company without any outside influences.
9. Risk Management
You can ensure your business continues to run smoothly and maintains a high ESG rating by routinely performing health checks. Health checks include risk management assessments, audits, and company satisfaction surveys.
Learn More about How to Rethink ESG in Your Business
Changing how your business operates starts with small steps towards a more sustainable future. At Televerde, we believe in transforming lives along with generating revenue. You can start making your impact by implementing practices that adhere to ESG standards.
Contact us to learn how you can improve your company’s ESG rating by investing in a positive social relationship with your customers.