Business is different now, thanks to ESG

The impact of ESG on business is wide-reaching, from operations to investments. Consumers and investors are no longer strictly product or profit-driven - they want to partner with and purchase from companies who align with their values. Even employees are putting ethics first - seeking employment with organisations that have undergone quality corporate sustainability training and have solid ESG propositions. 

Laila Hamzi at the Victorian Bar practices commercial law, public law, international arbitration and specialises in ESG. “The focus for business is no longer only on traditional financial performance, but also on how well a company performs against ESG metrics, which include a whole range of non-financial considerations that fall into the E, the S and the G,” Laila said.   

Corporate sustainability and investor pressures

In addition to the innate desire to do good in the world, businesses are feeling the pressure to act on ESG from several sources – which is why it has become a central issue for companies. 

“Those sources include things like investors, shareholders - who are now more active at annual general meetings and will make decisions based on how a company is performing against ESG metrics”, Laila said. 

Research by PWC released in September 2021 showed that 80% of investors surveyed said that ESG was a significant factor in their investing decisions. Additionally, 49% of investors said they would sever ties with a company if they weren’t proactive enough in addressing ESG issues. The research also revealed that most investors expect ESG to be a central part of corporate strategy and understand that the costs of implementing ESG policies could lead to short-term profit loss.

Consumer and social pressures

Investors aren’t the only stakeholders keeping companies accountable to their ESG propositions – consumers also have a lot of sway. Customers are more informed than ever about societal issues and whether companies address them through their ESG propositions. If in the public’s opinion, a company isn’t performing well enough in the ESG sphere, they can easily divert their attention and money to another company. 

Data has shown that consumers are willing to vote with their wallets, with two-thirds of shoppers opting to pay more for a more sustainable product. And as Gen-Z (who prioritise sustainability more than any cohort) enter the workforce, these numbers will only increase.

The acceleration of ESG

There wasn’t a group, government body, social movement – you name it – that didn’t feel the ripple effects of Covid19, so it is no surprise that ESG was also impacted. The pandemic had a particular effect on the social component of ESG, bringing to light social issues and inequality in and out of the corporate world. Covid19 highlighted occupational health and safety, worker protection, gender inequality, responsible buying practices, supply chain issues, digital rights and privacy, to name a few. 

The attention brought to these matters saw an unprecedented increase in sustainable investing during one of the most significant economic downturns since the 2007 Global Financial Crisis. Covid19 served as a stress test on governance policies and procedures, as the organisations with the best governance weathered the pandemic storm better than most. Subsequently, companies with the highest governance scores attracted new investor interest.

Ultimately, Covid19 highlighted the importance of corporate sustainability to investors and emphasised the importance of future-proofing a business with a strong ESG proposition to withstand any future crisis.

Investing in corporate sustainability courses

The most fundamental tool in preparing for the transition to corporate sustainability is an ESG training course. Ensuring everyone on the team has the capability to identify issues of materiality, opportunities and risks will support the strategic and operational change ahead. Corporate sustainability training can provide foundational knowledge on basic ESG principles, concepts, terminology, risks and opportunities as well as emerging regulatory frameworks, underpinning an organisation’s successful ESG strategy.

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If you are ready to transition to corporate sustainability, our comprehensive elearning program, ESG Fundamentals, delivers critical insights and capability for Australian business leaders.

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