Fair treatment has become a decisive factor of success in the B2B industry. Which is why companies need a comprehensive ESG strategy which defines their own social, ethical and ecological actions. Not only your direct business partners, but also many investors expect this.
What does ESG mean?
The abbreviation ESG stands for environmental, social and governance. These refer to responsible engagement which companies set out to achieve concerning the environment, social issues and the company’s management. This preferably takes place within the scope of an ESG strategy which balances out and harmonises the individual measures.
Put plainly: ESG is the entire engagement of the company for society. For instance, it covers:
- Pledge drives
- Reduction of energy and water consumption as well as carbon emissions during production
- Activities to support inclusion and diversity
- Support for cultural events
- Fostering locations (cities, communities, etc.) and their institutes
- Championing more safety and health in the workplace
Last but not least, a comprehensive ESG strategy includes good long-term communication to spread the word about the respective measures and success amongst the target groups.
By the way, ESG is closely related to CSR. This abbreviation stands for corporate social responsibility and thus the social responsibility of a company. As a result, CSR is part of a comprehensive ESG strategy.
Survey: ESG is important worldwide
The interest of B2B partners in an ESG strategy from their suppliers is for two main reasons. First, more and more end consumers are demanding fair products, which is why many companies are setting up a sustainable supply chain. Second, the buyers themselves have their heart set on the topic for personal reasons.
This trend can be seen among many investors, as the survey Natixis Global Survey 2021 confirms. The Natixis Investment Managers agency commissioned CoreData Research to interview 8,550 private investors from 24 countries between March and April 2021. They found that 77 per cent of those surveyed see it as their duty to point out companies’ responsibility for society, climate change and discrimination. And 82 per cent see it as a company’s obligation to consider ecological issues.
A similar development has been identified by the authors of the survey The Corporate ESG Guide: A 360 View on the Current Landscape and Trends. According to them, companies need a good ESG strategy if they want to survive in the long term. The reason: due to the major relevance of ESG in society, rating agencies now take criteria for fair actions into account for their ratings. This has a direct impact on institutional investors. A poor rating of ESG factors can also lead to poorer conditions for financing from banks.
ESG strategy: what it can look like
The increase in standards regarding social, ethical and ecological measures is putting pressure on companies. The best way for companies to react is by setting up a comprehensive ESG strategy. Ideally, it is a holistic concept which manages all activities and brings them together. But individual actions are also a step in the right direction.
This is how an ESG strategy roadmap can look:
- Management takes stock of the company’s own options to identify a starting point for the next steps.
- Then they analyse where it makes sense to implement ESG measures in an effective and realistic way. The bigger the expected impact – also in terms of awareness – the better.
- The approaches identified should be based on priority and efforts required. Which ones have a balanced relationship between the business and fairness goals? It is recommended that companies focus on simple feasible projects to learn from them for later.
- For individual topics, concrete measures and achievable targets have to be defined. This includes an individual deadline for each project by which it should be completed.
- As soon as the ESG strategy is implemented, its success should be checked. For this, responsibilities, monitoring periods and measurable parameters must be defined.
By the way: good ideas can even lead to new sources of income. For instance, production waste or scraps can be reused in a cost-effective way or sold as raw material to other companies.