Using ESG to enhance sustainable & responsible growth

Today’s leaders are faced with an incredible opportunity to carve out a new future for their organizations by building sustainability principles into core business strategies. ESG has historically been an underappreciated source of competitive advantage. But in 2020, 14 out of 17 ESG-focused ETFs and funds outperformed the S&P 500 from January 1^st to May 15^th, according to S&P Global Market Intelligence.

While rapid growth and maximization of value for shareholders have often translated to short-term earnings through quick-gain solutions that disregard environmental and social impact, GDP is no longer the only yardstick to measure economic performance.

Statistics show that companies prioritizing ESG issues perform better across several financial metrics. Shareholders, investors, and consumers alike are becoming increasingly concerned with company ethics, responsible governance, and sustainable decisions that offer long-term returns. This means ESG-centric companies can drive profitable growth through business practices that decrease risk, align with customer values, and positively impact people and the environment.

ESG can help accelerate sustainable and responsible growth through value creation in five main areas:

• Increased revenue & sales
• Enhanced investment & returns
• Reduced operating expenses
• Reduced regulatory & legal interventions
• Improved productivity

A strong ESG proposition helps companies tap new markets while expanding within existing ones. How does this work? Simply put, ESG data and reporting builds trust. When investors, creditors, and governing authorities trust corporations, they’re more likely to award them the access, approvals, and licenses needed for growth opportunities. Additionally, centering your marketing efforts around your organization’s sustainability strategies and telling that story effectively will increase brand loyalty and value among clients and consumers.

ESG-centric companies can also enhance investment returns by allocating capital to innovative, sustainable opportunities such as renewable energy, waste reduction, and green technology. Forward-looking ESG decisions also help companies avoid stranded investments at risk of failure due to environmental or social issues.

Executing ESG effectively can help reduce operating expenses such as raw material costs, water, and carbon usage. While the investments required to update your operations may be substantial, continuing to rely on energy-consuming equipment, for example, can create a drain on profit in the long run.

A strong external value proposition and corporate transparency can help ward off regulatory and legal interventions. ESG helps reduce companies’ risk of adverse government and legal action through ethical, responsible decisions and operations, saving companies time and money that can be used for profit-generating growth.

Last but not least, human capital has often been an overlooked source of growth. Studies show a strong ESG proposition can help companies attract and retain quality talent and motivate employees, increasing overall productivity. Positive social impact promotes increased job satisfaction and greater loyalty.

If these points weren’t enough, here’s a key statistic: in 2018, BofA Securities, Inc. found that firms with a stronger ESG record than their competitors produced higher three-year returns, were more likely to become high-quality stocks, and were less likely to have large price declines or go bankrupt.

ESG materiality assessments

With investors inquiring more and more frequently about what your company is doing in regard to responsible investment, how you treat employees and vendors, your dedication to sustainability initiatives, and other activities that fall under the ESG umbrella, it’s important to have answers to these questions.

An ESG materiality assessment empowers you to easily report on your current state and outline future initiatives while taking into consideration your business goals and risks. Download our guide to creating and extracting the maximum strategic value from an ESG materiality assessment.

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Ryan Nelson

Ryan Nelson is Conservice's SVP & General Manager, ESG. He has over 20 years in enterprise software and management consulting experience, including supply chain software implementation and process optimization for fortune 50 companies. Since 2009, Ryan has been focused on helping companies amplify their ESG impact with technology.

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