Environmental, social and governance (ESG) initiatives help improve social responsibilities of companies, identify and manage risks, meet stakeholder expectations and improve long-term sustainability. Finance leaders are tasked with overseeing the implementation of risk-management strategies and initiatives that drive value.
Boston Consulting Group’s Steve Young believes that all individuals in an organization have to be engaged and prepared on their priorities when it comes to ESG. Young explains that employees as well as the leadership team are a company’s ambassadors and are best placed to share ESG progress with stakeholders.
For these initiatives to create value for businesses, however, leaders need to know where to start: by understanding both the specific priorities of their stakeholders as well as their concerns, so they can align their ESG strategy.
It is expected that as financial institutions and consumers become more conscious of sustainability and require their partners to comply with ESG standards, financial flow may become constrained for some. To prevent this, leaders need to quantify any financial risks linked to their company’s noncompliance practices and turn them into opportunities. This could be done by establishing sustainability equity with important stakeholders, implementing upfront business planning and creating an early competitive advantage.
When it comes to spending on ESG and sustainability, leaders need to focus on prioritizing the most financially viable options. This can be divided into costs, investments and saving. Under costs, spending will need to be compared to the risk of penalties for being noncompliant or for losing business as a result of said noncompliance.
Under investments, leaders need to focus on the development of greener tech or products that are consumer relevant. This may, if properly done, enhance shareholder value. Additionally, companies may work with their marketing or research and development teams to examine where opportunities exist in the use of their products, in comparison with what customers are willing to pay for.
Regarding saving, leaders need to scrutinize their operations and become more efficient in the use of resources, materials and energy, all while avoiding wastage.
Proof of concept testing is recommended for any sizeable and new investments, as this helps validate any assumptions. Process-mapping exercises may also be conducted to view optimization opportunities in a company’s supply chains.
Collaboration is known to increase accountability and transparency while optimizing resource utilization. However, it can also be leveraged to create value for businesses as it enhances a company’s reputation. Positive image attracts investors and consumers who prioritize sustainability and ethical practices.
The integration of ESG best practices is an ongoing undertaking that companies such as Coyuchi Inc. have to gradually implement based on the specific circumstances and resources available to them. As the benefits become evident, further rollouts are bound to gain momentum.
NOTE TO INVESTORS: The latest news and updates relating to Coyuchi Inc. are available in the company’s newsroom at https://ibn.fm/COYU
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