Investing in Tomorrow, Today: How ESG Influences Sustainable Business Strategy

Investing in Tomorrow, Today: How ESG Influences Sustainable Business Strategy

ESG is not a new topic as it relates to global business strategies but interest has exploded in recent years. Introduced back in the 1970s, the idea of Environmental, Social, and Governance (ESG) practices as an operative corporate initiative didn’t really start to ramp up until the turn of century. Over the last few years, the practice really caught on as more and more investors are now weighing their portfolios with their core values which include the idea of a more sustainable future. In turn, these types of investments are starting to pay off as the dividends on ESG-weighted portfolios are showing returns on par, or exceeding those that are not. 

ESG policies that are meant for a safer, more just, and equitable tomorrow are not just a theme; they are sound business and becoming more common within the global marketplace. With the world’s largest economies (China, European Union, UK, Japan, South Korea, and Canada—along with the United States) committed to meeting net-zero emissions targets by 2050, the investment implications are significant and driving the way companies have to do business. On a similar track of investing in ESG fueled businesses, people are divesting in those that are not. So, the question is no longer, “should we invest in an ESG business strategy,” but “how do we catch up,” if you’re a company that hasn’t already ventured down the path. 

Moving forward with ESG 

As ESG alignment continues to rise to the top of company priority lists, there still remains questions as to how an organization goes about figuring out how to incorporate it into the business strategy. There’s also an interest in who has already incorporated it as a major component, and further, who may be unsure of its merits. 

In response to the latter, the short, simplistic answer is, “few and far between.” While they still exist, by not getting up to speed on sustainability as a lynchpin of operative strategy, those not working to comply with ESG standards are only doing a disservice to the longevity of their existence. In the short term, their aim is to protect existing subsidies, jobs, and business models, but this is shortsighted as businesses failing to make ESG-related strides are finding it harder for them to access capital investors and commercial opportunity to facilitate business growth.

To get an idea of just how far organizations are along incorporating ESG missives as a working piece of their operative strategy, Cority recently engaged with independent research firm, Verdantix, to find out:

  • The state of corporate sustainability culture
  • Where 50 executives across five different industries fall on the ESG maturity scale
  • How executives are using operational data to define overall ESG and sustainability strategies
  • Which technologies firms are investing in to improve their own ESG performance

One of the most noteworthy statistics stemming from our study with Verdantix was the idea that 92% of respondents indicated that they were changing their company’s overall business strategy and working model to be more sustainable. 

For those more actively engaged, they weren’t only looking at ways to improve their ESG compliance measures internally, but were also extending outward and looking into their value chain usage as well. We’ve come to learn that globally, some 72% of survey respondents indicated that they were focused on sustainability collaboration across the value chain. Further, in Europe, this number inflated to 80%. Sustainability collaboration in the value chain and the way business extends outward is a fundamental aspect to enabling significant corporate strategies including net zero emissions targets.

Pushing the ESG culture forward 

An area we identified that could have room for improvement that will positively affect the way sustainability initiatives are adopted throughout company departments is by creating more educational awareness initiatives for the employees of the company. ESG is no longer something an executive needs to consider as a working piece of the company strategy, it’s a way of doing things that needs to extend throughout all aspects of the company in order for it to achieve maximum saturation. Here’s what we uncovered: 

  • 38% of employees throughout the business understand the sustainability agenda and performance
  • 26% reported that their understanding was that sustainability is mainly championed by senior executives
  • Only 18% of employees directly involved in sustainability initiatives understand the firm’s sustainability agenda and performance
  • A mere 12% of employees take responsibility for the firm’s sustainability performance and drive innovation
  • And finally, 6% of firms mentioned that there is only a minimal understanding of the firm’s sustainability agenda

While it’s good that there are awareness initiatives already in place across the workforce, as ESG becomes more and more commonplace, we’re going to need to collectively push forward an agenda that is more widely inclusive, which will only improve holistic ESG-rooted performance. 

Data is driving ESG business decisions 

Since ESG processes are related to the productiveness of a business, it’s no longer good enough to just “talk about it”. Data is being utilized to assess the effectiveness of adopted ESG strategies, and will be further leveraged to ensure that informed practices moving forward are up to global sustainability standards. With 88% of our respondents indicating core data gleaned from business functions was being used to define overall corporate ESG strategies, we see a shift away from defining strategies based on marketing or communications incentives. EHS software has a key role to play in helping collect, aggregate and analyze this data, providing leadership with actionable insights.

As the calendar nears 2022, it’s imperative to get on the ESG path and push your company forward in a manner that facilitates a more prosperous and sustainable future from myriad vantage points. Data from our study showcases that 57% of respondents are expecting to see a dramatic double-digit rise in ESG initiative spend in 2022. 

Curious to learn more? Download the full 26-page report right here