What is ESG and does it add value to your business?
Every business, what ever the size is now deeply entwined with environmental, social and corporate governance, but how can it impact on your top and bottom line?
A November 2019 McKinsey report stated that companies that pay attention to these 3 areas and invest both time and money into them deliver a positive value return rather than a drag on resources.
So what are we talking about specifically:
E – Environmental – this is probably the easiest to understand and relates specifically to the impact your business has on both the local and global environment.
S – Social – this is the relationship you and your business has with other businesses and its community both locally and globally. With greater focus on inclusion and diversity, how your business conducts itself can very quickly be analysed under a global microscope.
G – Governance – these are your internal processes and practices that ensures you make effective decisions and comply with the law. Every legally created company should have the appropriate documents and process to ensure good governance.
As a director, executive or non-executive, it is your responsibility to have constructed appropriate guidelines, policies and processes to ensure you deliver against each of the above.
I have outlined below 5 areas specifically where good management can help your value creation:
TOPLINE: if you were seen to be a sustainable business with strong links to the community, then studies have shown customers will either consciously or sub-consciously prefer to trade with you.
COST REDUCTIONS: Managing your travel, energy consumption and use of consumables can all reduce your business costs. Having a policy of obtaining 3 quotes for a large project, might also delivery cost savings.
SUBSIDIES & GRANTS: Having good governance and visible policies will ensure your applications for work, grants or subsidies is more likely to be accepted.
PRODUCTIVITY: Working with your colleagues to create clear policies can increase motivation and therefore productivity. Good governance can also help you attract better talent into the business increasing your skills base.
INVESTMENT: When seeking investment, a strong board with clear policies and governance is a big tick in the box for investors. They want to know that the business is making sound decisions and therefore ensuring their investment is being used to maximise returns.
Taking this approach to running your business with your fellow board members is not new, the economist Milton Friedman was quoted as writing nearly 50 years ago, “It may well be in the long-run interest of a corporation to devote resources to [its] community or to improving its governance; that it may make it easier to attract desirable employees or have other worthwhile effects”.
If you need external support or you are recruiting for a non-executive board member, then please email or call me on firstname.lastname@example.org or +44 7783 339773.