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Should You Care About ESG?

What is ESG and why should you care?

The pandemic has forced a noticeable shift towards more socially conscious business practices, with companies looking outside of profit as a measure for future growth and success. The non-financial metrics that are the current hot topics are Environmental, Social and Governance factors which make up the blanket term “ESG.”

But what is ESG, and how can you make provision for it in your business processes?

Environmental, Social and Governance (ESG) Policies

Company ESG policies and practices can be applied as a tool to measure sustainability. Often used by investors as part of their analysis to identify risks and growth opportunities, ESG disclosures are increasingly considered a marker for sustainable, ethical, and responsible investment decisions.

This means that all companies should be focusing on ESG factors to not only make themselves more attractive to investors, but also to ensure future growth.

But what exactly is ESG?

Many ESG factors straddle more than one topic, but in general:

  • Environmental – concerned with conservation of the natural world including biodiversity, deforestation, climate change, carbon footprint, pollution, energy efficiency
  • Social – considering the people who will encounter the company. This includes customer satisfaction, employee engagement, human rights, DEI (diversity, equality, and inclusion)
  • Governance – the standards used for running the company, including board composition, executive pay, auditing

Environmental (E)

While eco-credentials are nothing new, the trend for green washing is firmly out like last week’s recycling.

As society becomes more aware of corporate responsibility, there is an urgency for a genuine and considered understanding of the impact companies are having on the local and global environment.

With benefits from improved reputation, through to preventing fines and the risk of non-compliance, there has never been a better time to go green.

Social (S)

Environmental factors have historically dominated discussions around sustainability, but the pandemic and the anticipated mental health crisis have forced the social side of ESG firmly into the spotlight.

As social responsibility becomes more important to society, companies need to recognise the impact they might have on people or communities that encounter them. This means placing the wellbeing of workers, customers, and local communities at the forefront of everything they do.

Having robust social policies in place can give a noticeable boost to productivity and morale, as well as reducing staff turnover and being more attractive to the top talent. It will also stand you in good stead with local communities, improving brand loyalty.

Governance (G)

Governance is all about taking responsibility and ensuring that companies are being good corporate citizens.

Governance means making sure that the company is being responsible for, and ethical in, its actions, starting at the top with board members and executives. The positive outcomes for good governance include providing investors with a safer investing opportunity, with less likelihood of financial surprises, protecting shareholders and ensuring ethical practices.

How to improve ESG performance

ESG is a gigantic topic, but the three most important ESG tasks to consider are:

  1. Understand which sustainability topics are key to your industry and sector – and ensure that you are considering all stakeholders. Prioritise those which provide greatest value to investors, stakeholders, and company growth.
  2. Integrate ESG factors into your business strategy – and communicate it to the entire company from the top down. Decide with whom final responsibility falls.
  3. Prepare for standardisation – the EU announced regulatory changes relating to ESG in 2019 and 2020, and the UK government has said it intends to bring about a “green industrial revolution” after Covid-19. This will mean increased regulation for environmental factors. Many ESG advocates have called for standardised reporting, to provide a framework for disclosure.

 

By integrating ESG into your business now, you are preparing your company for future growth by considering the impact that your company can have on the people and environment around it. When businesses focus on making that impact positive rather than negative, they are better able to improve profits and reputation, as well as being a better investment opportunity.

HOW JMK CAN HELP YOU

Since 2002, JMK have been compliantly consolidating back-office, accountancy and payroll functions. 

We have evolved to provide a range of expert services; such as Professional Employer Organisation (PEO), or Back Office Support (BOS) or Funding, becoming a leading provider to the contracting industry.

We know every agency is different in some shape or form, even if only by a little, but important bit. Combining our knowledge and experience of multiple sectors enables JMK to support you all from recruiters and payroll, through to finance, compliance and management.

With JMK as your trusted partner, even the smallest team can process the largest payroll, regardless of payroll type.

Have a look at the wide range of services our Professional Employer Organisation (PEO) or Back Office Support (BOS) can provide to you and your business, it is far more than just payroll and finance.

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