What is ESG and how does it affect the company?

Modern corporations are continually introducing innovative processes into their operations to support their growth and build a positive reputation. There is a particular emphasis on equality and environmental performance. ESG - what is it, how does it affect companies' operations and when is it worth introducing this strategy into business?

ESG - what is it?

ESG stands for Environmental, Social and Corporate Governance. It stands for environmental, social and corporate governance. ESG is therefore a set of corporate principles by which companies take care of the environment, relations with customers or employees, and harmonious and properly structured work.

The concept is derived from CSR, or Corporate Social Responsibility. CSR also refers to sustainable working and treating people and the environment well, but ESG is an even broader concept. Its implementation into a company involves the obligation to report the company's activities in three scopes - environmental, social and corporate. Special ESG ratings are being developed so that customers or business partners of companies can verify whether a company is actually incorporating processes into its operations. What also matters is what effects these activities have on the environment.

ESG strategy is becoming more and more popular, as an increasing percentage of entrepreneurs know that they will not succeed if they focus only on their own profit. In order for a company to grow dynamically, it is necessary to take care of all areas of its activity, including even those not strictly related to the company's profile. It is therefore worth taking action to reduce the harmful impact of production and trade on the environment or to care about combating exclusion and equal pay regardless of gender, age or religion.

One of the Polish companies using this model is InPost. The company's activities aim to meet the UN Sustainable Development Goals. InPost cares about zero-emission product delivery, as well as employee development. The pursuit of climate neutrality is included in the new measures.

ESG criteria and business management - how does it affect?

ESG standards have a very strong impact on business management. This is partly because they affect so many levels. One of the most noticeable impacts on a company is that customers are more likely to use its services. Pro-environmental measures or equality values help to build a brand profile that is attractive in the eyes of the consumer. This, in turn, leads to increased sales and also opens up avenues for new opportunities.

Such an opportunity may be more successful in finding new investors or business partners. Large corporations are most likely to partner with companies that have a positive ESG reporting record. It is much easier for companies operating on the basis of Environmental, Social and Corporate Governance principles to obtain loans for new investments or to inspire respect among competitors.

When a company grows, it needs many new employees. ESG enables not only the growth itself, but also more efficient recruitment. Why? Candidates who genuinely care about their work, have the desire and broad knowledge, apply precisely to companies that not only offer them stable employment, but also represent their ethical values. This makes it easier to find the specialists they need in many fields.

ESG can force a company to completely change the way in which existing processes are implemented. This may require considerable investment in the initial phase, but it is certainly worth investing in such changes, as they will soon pay off. An example of such a transformation could be, for example, replacing ordinary cars with electric ones or installing renewable energy systems. Investment is also required in the training of employees, during which they will be introduced to the new standards of business operation.

Companies that decide to start acting according to ESG are more likely to grow rapidly than those that run away from such a commitment. Very often, methods of caring for the state of the planet require the use of new technologies. Testing innovative solutions drives action and the implementation of newer and newer devices, including, for example, robots or vending machines. An example is the InPost Appkomat, which consumes less energy thanks to the absence of a screen. Operation of this type of machine is possible from the level of the InPost Mobile application.

How should you introduce ESG into your own business?

Introducing ESG criteria into a company can look different because of what the company deals with. However, it is worth addressing what concerns every business to begin with, which is to consider the issue of the company's working standards and whether environmental measures are being taken in internal processes.

The first aspect is simple to address. It is enough to even out wage disparities, as well as to ensure the inclusiveness of the organisation and not to reject anyone on the basis of age, colour, disability or gender during recruitment. In environmental processes, even the smallest details, such as water and energy conservation or waste segregation, need to be taken care of.

Next, it is worth addressing the issue of business partners. If you run an online shop or a sewing room, for example, only use quality and ethical wholesalers with goods or fabrics. Check that the suppliers you work with operate on ESG principles and are certified for sustainable sourcing. When something raises your concerns, it is likely that you will need to change to another partner.

When introducing ESG into a company, it is very important to plan your activities and goals. It is not worth pursuing sustainable operation in the dark. Clear targets, such as reducing the amount of money spent on fuel or the amount of electricity and water bills by a specific amount, for example, help you to implement and drive you to action.

For inspiration on what you can do in your organisation, be sure to refer to the principles of non-financial reporting. You will find aspects that you will need to report on, so it will help you considerably in determining what to pay the most attention to. Having a thorough understanding of what an ESG rating is is very helpful.

Training will be required for all company employees to implement the changes. ESG affects many areas of a company's operations, so everyone in the organisation needs to know why different processes are changing and what all the changes are about.

When is it worth introducing ESG?

You already know exactly what ESG is, so it's time to hint at when it's worth introducing the system into your business. The best answer to this question is - as soon as possible. ESG is the future of any business, whether you're dealing with a small or large enterprise. If you want to grow your business, then introducing ESG is virtually inevitable.

Of course, the process needs to be properly prepared, but it is not worth delaying. Nowadays, when the climate awareness of consumers is so high, only companies operating on the basis of Environmental, Social and Corporate Governance criteria stand a chance of future-proof and efficient development. This is an important issue for those entrepreneurs who intend to cooperate with companies from abroad. Most Western corporations only consider for cooperation companies that are characterised by sustainability and respect for all employees.

ESG risk is an interesting phenomenon, something that banks in particular have to contend with. The implementation of change is not immediately successful in all companies. If an organisation takes out a loan and later encounters financial difficulties, the situation can prove problematic for the bank as well. The liquidity of banking institutions is something that facility representatives need to include in their risk management strategy.

ESG versus CSR - you already know the differences between the two strategies, so you probably know what is worth introducing in your company. Developing your company or company's ESG principles will be appreciated by everyone - both investors and employees. It is essential in adapting to the market. A relationship with the environment, ethical product manufacturing and respect for employee and local society is a recipe for increased performance and brand credibility. If you are in business, don't give it a second thought. ESG is waiting just for you!