Posts Tagged ‘diversity and inclusion’

What is ESG and how does it create value for your business?

Tuesday, November 23rd, 2021

Your business, like every business, is deeply intertwined with environmental, social, and governance (ESG) concerns. Voltedge Management can work with you to develop your own ESG strategy that will engage your employees and stakeholders. We can leverage our extensive experience  to create a programme that will be tailored and personalised to your business needs.

The E in ESG, environmental criteria, includes the energy your company takes in and the waste it discharges, the resources it needs, and the consequences for living beings as a result. Not least, E encompasses carbon emissions and climate change. Every company uses energy and resources; every company affects, and is affected by, the environment.

S, social criteria, addresses the relationships your company has and the reputation it fosters with people and institutions in the communities where you do business. S includes labour relations and diversity and inclusion. Every company operates within a broader, diverse society.

G, governance, is the internal system of practices, controls, and procedures your company adopts in order to govern itself, make effective decisions, comply with the law, and meet the needs of external stakeholders. Every company, which is itself a legal creation, requires governance.

Just as ESG is an inextricable part of how you do business, its individual elements are themselves intertwined. For example, social criteria overlaps with environmental criteria and governance when companies seek to comply with environmental laws and broader concerns about sustainability. Our focus is mostly on environmental and social criteria, but, as every leader knows, governance can never be hermetically separate. Indeed, excelling in governance calls for mastering not just the letter of laws but also their spirit—such as getting in front of violations before they occur, or ensuring transparency and dialogue with regulators instead of formalistically submitting a report and letting the results speak for themselves.

But even as the case for a strong ESG proposition becomes more compelling, an understanding of why these criteria link to value creation is less comprehensive.

How exactly does a strong ESG proposition make financial sense?

ESG links to cash flow in five important ways:

  • facilitating top-line growth,
  • reducing costs,
  • minimizing regulatory and legal interventions,
  • increasing employee productivity, and
  • optimizing investment and capital expenditures.

Each of these five levers should be part of a leader’s mental checklist when approaching ESG opportunities—and so should be an understanding of the “softer,” more personal dynamics needed for the levers to accomplish their heaviest lifting.