The Business Case for ESG

The political narrative from some parts of the world might make you wonder if Sustainability is the enemy of successful business. The EU having delayed the introduction of CSRD and also reducing the number of companies who will be reporting has also created a huge amount of noise in the ESG space. In reality, none of this changes the need for business to identify and mitigate against significant risks to their operations if they want to remain viable in to the future.

Lets consider some of the evidence that contradicts the "Sustainability is the enemy of Business" narrative. Environmental and Social factors are so intrinsically linked to business success that to try and pitch Sustainability against Business profitability is non sensical.

According to the World Economic Forum, over half of global GDP is moderately or highly linked to nature (nearly $50 trillion a year).

Businesses in all sectors rely on natural resources to facilitate their activities and services and generate revenue. Agriculture, Food and Bev, Manufacturing, Tourism, Tech, Retail all hugely dependent on natural resources including water which most businesses do not have high enough on their operational risk registers.

There are real and imminent environmental and social risks to business viability and long term profitability that shareholders will expect to see on corporate risk registers. Businesses need to be able to credibly demonstrate that they know what they are and that they have considered them.

Assets need to be mapped for climate risks and measures taken to ensure future resilience. Supply chain risks need to be mapped to ensure security of supply and to open up opportunities for improvement. This also enables companies to start adapting their operations to make them less vulnerable to known risks. Insurance companies will expect to see this level of due diligence and will be able to catagorise it as companies taking reasonable action to protect themselves. If you have done nothing about known climate risks, will your insurance be valid?

If you plan to sell your business, prospective buyers will want to see that it has long term viability, which again links in to climate resilience and social change. Will there be available natural resources, human resources and supply chains in the areas where your organisation needs them in years to come to continue with business as ususal? Will you be able to access competitive finance rates to fund future growth. "Green" finance is already available at cheaper rates to those who can demonstrate that they are decoupling their business activities from carbon.

Use these key ESG considerations for future business success;

• Recognise that environmental and social factors are deeply linked to business profitability and long-term viability.

• Understand that over half of global GDP is dependent on nature and natural resources, making sustainability a core business issue.

• Identify and mitigate significant environmental and social risks to operations—these should be reflected on corporate risk registers.

• Map assets for climate risks and take measures to ensure future resilience.

• Assess and manage supply chain risks to secure supply and identify opportunities for improvement.

• Demonstrate credible awareness and action on ESG risks to shareholders.

• Don't underestimate the effect on the value of your business by not being prepared for climate resilience and social responsibility.

• Consider the availability of natural and human resources, and supply chain stability, for ongoing operations.

• Leverage access to "green" finance, which often offers better rates to businesses that can show progress in decoupling from carbon.

These steps help ensure your business remains competitive, resilient, and attractive to investors, buyers, and insurers. Your ESG strategy needs to align to your organisational goals and cover all of the essential areas ensuring you are leveraging opportunities as well as mitigating against risks. At Evolve ESG we can simplify the journey to best in class Sustainability strategies to ensure your business is set up for future success.