The Growing Importance of ESG to Business

Business publications are full of articles regarding corporate environmental, social, and governance (ESG) programs. Until recently, ESG wasn’t on the radar of most corporate executives. Now, in response to increasing pressures from consumers, investors, and regulators, ESG is a significant concern for just about every large company, regardless of industry.

The Securities and Exchange Commission is working on ESG and may be issuing draft standards this year.

What is ESG?

ESG may mean different things to different companies but generally encompasses a variety of social and environmental considerations that may include:

• Environmental. An organization’s impact on energy efficiency, sustainability, carbon footprint, greenhouse gas emissions, deforestation, biodiversity, climate change, pollution, waste management, water use and more.
• Social. An organization’s employment practices, talent management, consideration of social impacts of supply chain, treatment of suppliers, racial justice, pay equity, human rights, data protection, privacy, community relations and more.
• Governance. An organization’s strategy for ethics, transparency, board composition, diversity, equity, inclusion, oversight, compliance, executive compensation, political contributions, lobbying and more.

Many business leaders know they need some form of ESG to remain culturally competitive and attract and retain their workforce and investors. In some cases, it makes a company more efficient and cost-effective.  As the concept is still evolving, adapting it to the company, and implementing the practice requires significant effort, resources and investment.

Companies that actively maintain their ESG practices benefit greatly from happier stakeholders, increased investment, healthier bottom lines, and an actionable commitment to improving their community and the world.

The Time is Now

While ESG is nothing new, the actions of consumers, employees, and investors toward organizations that fail to pay attention are significant. ESG efforts are now tied to investments in public and private markets, operations, corporate form and governance—essentially impacting the very core of a business.

At the moment, the standards are fluid and the talk is about the largest companies developing ESG programs and standards, but it is likely that these large companies will soon be demanding their vendors adopt their own ESG programs.

Give Jaffe a call today if you would like to discuss ESG’s growing importance to your business—and the marketplace at large.