[ESG Blog Post #1] ESG and the adequate reporting thereof have major impact on every company. In the end, it is not only required by the European Union’s (EU) Corporate Sustainability Reporting Directive (CRSD), but also important for the wellbeing or even survival of your business. In this first blog post from a new series on ESG-related topics, CFO Services expert Mario Matthys shares his views on the importance of ESG and CRSD.
Four reasons why ESG and CSRD will create opportunities for your company
One way or another, ESG and CRSD, and the way you deal with them, will have an impact on your company. And this time, we are not talking about a negative impact. Rather, sustainability should be viewed as an opportunity, not a burden, a cost or a punishment. Here are four reasons why.
ESG will make or break a company’s reputation
1. Strategic impact
ESG will increasingly act as a differentiator in the marketplace. In the foreseeable future, if someone has to choose between a product from a sustainable company or one by an unsustainable company, the odds are fairly high that they will choose the sustainable company’s product. And those odds will only increase over time.
Today, we still see many people choosing the cheapest option, but we are at a tipping point. Society will increasingly look beyond the financial numbers. They will look at the sustainable values a company aspires to and how these are translated into practice and into the culture of the firm.
Ultimately, ESG will make or break a company’s reputation. Companies that cut corners and do ESG reporting for compliance will not be able to compete with companies that have a holistic sustainable mindset and business strategy. Soon, the former will be outcompeted at the B2B and B2C levels, and the latter will prevail and continue to make healthy profits.
2. Attracts investors
In the foreseeable future, every company will be ranked according to ESG scores, making it very easy for anyone to compare companies based on their sustainability values.
Customers, suppliers, banks and investors will look at these scores to such an extent that they will influence their decisions. Banks, for example, will give companies a sustainability score and their interest rates for loans will depend on it. ESG will therefore become an increasingly important measure of a company’s value, resilience and strength.
3. It will attract new talent
If your company is actively working on sustainability and it has a certain sustainability reputation, it will be much easier to attract new and motivated talent. It is remarkable how much younger generations attach value to ESG. Rather than just looking at compensation, younger generations also value working conditions, well-being, work-life balance, and environmental conditions. They value purpose. The war for talent is escalating, and ESG is becoming an important factor in attracting and retaining talent.
Reducing energy or water consumption, improving waste recycling, reducing CO2 emissions, and other ESG goals can be catalysts for operational efficiency
4. It will increase efficiency
Companies are often unaware of how ESG is an opportunity for the company to be more efficient and save costs, or they lack insights into these opportunities. A company can for instance achieve the same results in less time or with fewer people, if their well-being is high and if they feel engaged. Further, by focusing on ESG, a company can create newer, better products, which in turn can increase efficiency. Reducing energy or water consumption, improving waste recycling, reducing CO2 emissions, and other ESG objectives
can be catalysts for operational efficiency.
