Suggestions For Middle-Market Companies

How can ESG initiatives unlock value in your business?

What is ESG?

ESG Initiatives include environmental, social, and corporate governance initiatives. They contain a set of practices and metrics that are used to elevate a company beyond its financial performance, focusing on sustainability and other challenges facing businesses.

Why is it important?

ESG is more than managing risk and improving your business reputation.

In addition to being good business practices, businesses that formalize and document their ESG practices may be more attractive than businesses that do not. Potential investors or buyers may be willing to pay a premium for your business. In addition, ESG Funds are looking for investments in companies that can demonstrate successful ESG initiatives. ESG investors are sophisticated, long-term oriented, and focused on sustainable competitive advantage.

How does ESG create Value and Impact?

The ESG connection to value is an opportunity to differentiate your company. That’s why you need to make the ESG-to-value connection clear. ESG efforts have to show up in financial performance.

Value creation and sustainability go hand-in-hand. Sustainability accelerates growth, leads to higher financial returns, improves operational efficiency, increases talent retention and employee engagement, and more.

What can you do to improve ESG initiatives and results within your company?

You can improve ESG initiatives and impact your business by looking at your company through an ESG lens.

Environmental

Environmental considerations include striving to lower costs and improve business practices related to supply chain management, sourcing of energy, hardware, water, and waste, and operations’ environmental footprint.

Look for ways to reduce your company’s environmental footprint in the short and long term. You may identify quick wins and things that you’re already doing. You can begin documenting and implementing these practices right away. Other improvements may be further out, for example, when you replace equipment with more energy-efficient equipment.

Social

Social considerations include actively managing material, social issues such as product safety, customer data privacy and security, ethical advertising standards, fair pricing, and employee inclusion. Be socially aware and contribute to your community to make a positive impact.

Governance

Corporate governance considerations include establishing an independent Board of Directors where the board acts as a check and balance for your vision, strategy, and business accomplishments. Institute a corporate governance structure that specifies the rights and responsibilities of stakeholders and the rules for decision-making and establishes a code of ethics and standards for professional conduct.

Many of these suggestions are basic good business practices; you may have already implemented some of them in your company. It’s important to intentionally implement and document your practices and make the ESG-to-value connection.

A good start would be to designate an ESG Champion for your company; this should be someone passionate about improving ESG efforts. Then, assemble a small group to focus and work quickly to brainstorm cost-effective ESG improvements. Then, document existing and new practices and create metrics to measure performance over time. Creating value and impact doesn’t have to be an overly burdensome process.

Determine what actions you can take to demonstrate your commitment to ESG and how those actions positively impact your company. Where possible, link the actions to improved company growth and profits.