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Top 5 Ways ESG Reporting Boosts Your Business in 2024

In 2019, 90% of S&P companies published their environmental social and governance (ESG) reports. According to studies, a well-prepared ESG report with a valid action plan is more likely to increase your sales, capital inflow, your probability of hiring top talent, having government support, and reducing variable costs. As a result, this article lays out a method for CEOs & managers to improve their companies’ success while also contributing to the resolution of global environmental and social issues.  

Enhance the brand image

According to recent studies, consumers and investors value corporations that take steps to address environmental or social issues. In this regard, AIMultiple advises, executives to disclose their company’s ESG reports annually and use online media to engage consumers and investors about their ESG-related improvements.

Customer-based brand equity (CBBE) is the added value imposed on products and services as a result of how customers think, feel, and respect the brand. A similar principle may be seen in investment decisions, where a company’s goodwill (intangible assets, vision, mission, and story) has an impact on its financial performance. For example, Amazon has not made a profit during most years, but its stock value increased spectacularly.

1. Attract more consumers

According to PWC, 49% of all consumers and 66% of millennials use the internet to learn more about a company’s ESG practices before buying a product or service. Simon-Kucher & Partners found that 85% of shoppers are more concerned about whether the things they buy are ecologically friendly than they were five years ago.

The younger the generation, the more worried buyers are about ESG standards (see Figure 1). As a result, businesses should keep in mind that each day they do not adapt their business practices, their market share will erode further.

Figure 1: Percentage of consumers are concerned about your ESG story:

Image shows that millennials and gen z is more ESG cautions conside to baby boomers.
Source: PWC

2. Attract more capital and investment

Investors are increasingly demanding their investments to abide by certain ESG criteria which are called ESG-mandated or ESG assets.

According to Deloitte, ESG-mandated assets accounted for roughly 10% of total assets in 2012. This number surpassed 25% in 2018, and Deloitte expects that by 2025, ESG mandated assets would account for half of all professionally managed assets in the US.

Most studies have demonstrated a favorable association between ESG reporting and financial performance, as illustrated in Figure 2. 

According to a Nasdaq analysis, ESG investors are becoming more long-term focused since they want to see benefits in years. Thus, companies that pay attention to ESG standards may be less harmed by stock market fluctuations due to the stickier positions of investors.

Figure 2: ESG reporting and financial performance:

Source: NYU-RAM

3. Hire and retain talented employees

ESG can improve employer branding, too. Companies that put more effort into ESG standards, as shown in Figure 3, are 25% more appealing to young professionals and university students as candidate employers. In addition, ESG outperformer organizations have 14% higher employee satisfaction rates.

Attracting and retaining outstanding employees is a significant competitive advantage for a firm because it is rare, difficult to imitate and extremely valuable. ESG underperformers can invest in initiatives like employee training to increase retention, however this is costly especially for companies with high turnover rates.

As an example, oil companies have struggled to acquire top-tier talent, where the industry is associated with poor ESG practices. 

Executives should use social media to inform the public about their ESG-related improvements to improve their brand image.

Figure 3: ESG outperformers attract talents more easily:

Source: Marsh Mclennan

4. Turn the regulatory wind in your favor

Politics and economics are intertwined. Figure 4 shows how governmental support influences company earnings by up to 60% in some industries if regulations, subsidies, and bail become components of the sector.

As we highlighted in our article “3 Reasons Why You Should Measure Product Carbon Footprint,” nations and international organizations such as the World Trade Organization and the United Nations have shown a desire to limit climate change within a tolerable level. Countries are passing laws in this regard that penalize corporations that do not reduce their negative environmental impact.

Many countries, on the other hand, subsidize companies’ efforts to reduce their carbon footprint. For instance, Danish renewable energy company Orsted, receives a subsidy for building offshore wind farms in Germany. EU recently launched a green bond worth 250 billion euros to fund investment projects that will improve a company’s ESG score.

Similarly, several countries subsidize organizations that hire disadvantaged populations. In such a paradigm, for executives it makes sense to adopt values of the era and invest in ESG practices rather than swimming against current.

Figure 4: EBITDA stakes held by states:

Source: McKinsey

5. Reduce operational expenses

Because some of the greenhouse gas (GHG) emissions or water consumption is based on waste, leakage, or non-optimal business practices, when a corporation decreases its carbon footprint or water consumption, it almost always saves operational expenses. For example, employing 3D truck loading software helps organizations minimize not just their carbon footprint but also their distribution costs by allowing them to carry the same amount of goods with fewer trucks.

It is the same with route optimizer tools, smart HVAC and lighting systems, and choosing economy flights over business class flights. In this sense, measuring your company’s carbon footprint is the first step in lowering operating expenses caused by inefficient energy use. Since the actions that cause your company to emit too much GHG are also likely areas where you can improve operational efficiency.

To learn about supply chain sustainability to improve your corporate ESG score, you can read our 7 Ways to Improve Your Supply Chain Sustainability and Top 5 Technologies Improving Supply Chain Sustainability articles. 

You can find top carbon footprint calculator tools by reading our Top 7 Carbon Footprint Calculator Software/Tools for Businesses article.

You might also want to check our list of top reporting tools.

You can contact us to learn more regarding environmental social governance issues:

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Access Cem's 2 decades of B2B tech experience as a tech consultant, enterprise leader, startup entrepreneur & industry analyst. Leverage insights informing top Fortune 500 every month.
Cem Dilmegani
Principal Analyst
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Cem Dilmegani
Principal Analyst

Cem has been the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per similarWeb) including 60% of Fortune 500 every month.

Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.

Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised businesses on their enterprise software, automation, cloud, AI / ML and other technology related decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.

He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.

Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.

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