By: Pivot Energy
October 12 2022
“ESG” is a term that has been gaining traction for quite some time, but in case the concept is new to you, here’s a quick refresher. The acronym stands for Environment, Social, and Governance, and refers to the sustainability of a business’s operations. ESG entered the mainstream largely due to its importance to the investment community, but it is becoming increasingly important to additional stakeholders such as employees, suppliers, and customers.
Establishing a consistent and comprehensive ESG framework is a clearcut way of demonstrating that your company cares about its impact on people and the planet. Effective ESG policies accomplish much more than simply bolstering your company’s image, and they can serve as guidelines for navigating complex business decisions that directly impact your bottom line. Keep reading to learn more about how a comprehensive ESG approach can benefit your business.
ESG goals matter to your most important stakeholders. Recent evidence shows that customers and investors are actively seeking sustainable and socially responsible brands that align with their personal values – and beyond that, betting on companies with high ESG ratings is proving to be a sound investment.
A report from The Economist Intelligence Unit (EIU) and the World Wide Fund For Nature (WWF) found that Google searches related to sustainable goods have increased 71% globally since 2016, and in the US by 450%. In tandem, according to PwC’s 2021 Global investor survey, nearly 80% of investors said that ESG is an important factor in their investment decision-making. A report from Accenture Research found that between 2013 and 2020, companies with consistently high ESG performance scored 2.6x higher on total shareholder return than medium ESG performers. As explained in the McKinsey Quarterly, a strong ESG position correlates with higher equity returns and a reduction in downside risk, as evidenced by lower loan and credit default swap spreads and higher credit ratings.
It’s worth noting that unsubstantiated claims aren’t enough when it comes to ESG branding. Customers and investors are keen to know and willing to research which companies have formally structured plans for implementing their announced sustainability goals. Being metrics and data driven ourselves, we transitioned our original founding principles of triple bottom line (3BL) to an ESG framework, which holds us more accountable to the causes we care about most.
Beyond the importance of company image, having a solid ESG framework can have a direct positive impact on your bottom line.
Per the statistics mentioned above, genuine sustainability commitments set businesses apart. Especially in competitive markets, companies with clearly defined ESG frameworks can more easily attract consumers who are willing to pay a premium for environmentally conscious products or services.
ESG not only facilitates top-line growth, but also can reduce costs and minimize regulatory and legal interventions. For example, consider Extra Space Storage which installed 65 rooftop solar systems (a total of 5.5 megawatts) on storage facilities across eight different states. This emission-free and reliable energy portfolio was estimated to save Extra Space $600,000 during the first year and is projected to save a whopping $15 million throughout the systems’ 25-year lifetime.
Looking forward, the increased frequency and intensity of extreme weather events, which have sparked both wildfires and discomfort across the globe, will likely expedite the rise in climate-conscious consumers, a trend that will (unfortunately) inevitably continue for years to come. Furthermore, as the summers get hotter and the winters get colder, and power grids progressively struggle to accommodate the increased energy demand, there will inevitably be a subsequent increase in the demand for the reliable energy systems that solar provides.
It is likely that your company will soon be required, perhaps by federal / state / local mandates or investor interests, to substantiate your ESG commitments. Thus, now is the time to get ahead of the curve.
Corporations that proactively strategize implementation of their sustainability measures will have a better likelihood of being well positioned to succeed in this environment of increasing regulatory pressure. As stated in a report from Morgan Stanley, through its Real Estate Investing (MSREI) business, real estate portfolios with a comprehensive plan for monitoring stakeholder expectations are less likely to be caught off-guard by emerging tenant demands or community demands concerns.
Similarly, a carefully considered and executed ESG framework will ultimately be key for any business that hopes to last in today’s markets.
As you embark on your ESG journey, it is only logical to work with a trusted partner with its own formal ESG commitments. Pivot Energy has built a reputation as a company that values not just profit, but also people and the planet. These foundational values have always been a central part of the work we do, and by formalizing our approach with a clear ESG strategy, we can better help our clients achieve their own ESG goals. Contact the team at Pivot Energy to start realizing your ESG commitments today.