It has been difficult to read the news recently without the letters ESG being mentioned at some point. Frequently, it is either news from the investment world or large companies discussing their agendas, because they are required to. ESG (Environmental, Social, Governance) is a vast and constantly changing topic. The majority of progressive and successful leaders of today are embracing ESG throughout their businesses in various forms. It is a topic that is no longer background noise and should be considered the backbone of any business. At Menzies, we can help guide and assist businesses through a process to decide what areas you should be looking at and the value it can bring to your organisation.
Overall, it comes down to reducing risk and ‘future-proofing’ strategy that will make businesses more valuable and provide growth opportunities. Whether you are conscious of the pressures yet or not, acting now is your best option.
Regularly, businesses try to tackle the individual aspects of ESG in silos or wait to act, for the regulations trickle down to the smaller businesses. Nevertheless, ESG doesn’t have to be reactive and can benefit organisations in alternative ways, often helping tackle other business concerns.
Why ESG is important
So why would a company that isn’t being forced to put together an agenda or strategy bother? Isn’t it just a nice to have?
Well, what hasn’t been explained in depth previously is how SMEs can apply the ESG principles and frameworks to their business and the advantages that can come from them. How we view it is that, for those companies not forced by regulation, there is a significant opportunity to assess their position and create or modify a bespoke plan tied to their overall business strategy.
Frequently, it has been proven that ESG is firmly linked to the following benefits:
Enhanced Financial Performance
Focusing on ESG can help win tenders or ensure products appeal more to environmentally/socially conscious consumers, whether B2B or B2C. It can also result in cost savings, especially in buildings or offices. It is important to remember that there are favourable tax allowances aimed at innovation and installing environmentally friendly equipment. Companies with robust ESG strategies are also more probable to attract socially responsible investors, which can increase their access to capital and enhance their financial performance over the long term.
A positive reputation with customers, employees, and other stakeholders can be built through building a strong ESG strategy. This can lead to:
- Increased loyalty
- Wider brand awareness
- Bigger market share
Dependent on what your competitors are doing, this may be the USP for your business in the market.
By focusing on ESG issues, companies can identify and mitigate risks associated with issues such as: –
- Climate Change
- Labour practices
- Regulatory fines
- Supply chain management
To drive innovation and help companies identify new business opportunities, developing a strong ESG strategy can help to achieve this. For example, by developing more sustainable products and processes, companies can open up new markets and differentiate themselves from competitors.
Development In Employee Engagement
Attracting and retaining top talent is more likely to occur if Companies have a strong ESG strategy, as employees increasingly value socially responsible and sustainable workplaces. Furthermore, employees are more likely to be engaged and motivated at work if they believe their company is making a positive impact. In turn, this can result In a productivity uplift.
Measuring key metrics will benefit the business in understanding the starting point and will provide insight into factors needed to meet goals and objectives.
Beneficial Impact On The Environment And Society
Overall, companies can positively impact society and the environment if they have a strong ESG strategy. Companies can contribute to a better equitable, and sustainable future by prioritising sustainability, ethics, and transparency.
Meeting Customer Expectations
Customers increasingly demand that companies act responsibly and sustainably. Smaller companies can meet these expectations and build stronger customer loyalty by prioritising their ESG. Companies should consider the supply chain they are a part of and what the larger companies will look for.
Attracting And Retaining Employees
By focusing on an ESG strategy, a small company can attract and retain top talent. This is due to employees increasingly looking to work for companies that align with their personal values and demonstrate a commitment to social responsibility.
In conclusion, prioritising ESG can help any company build a more robust sustainable and resilient business, attract investment, employees and retain top talent and customers.
Menzies can help build your ESG strategy that identifies the benefits your business can enjoy from addressing ESG. If you want to find out more about ESG and how we can help you, visit our ESG services page, or contacting Menzies’ Finance and Sustainability Director Richard Singleton on [email protected].
Offering the full range of accountancy services, Menzies is headquartered in London (with a network of offices across Surrey, Hampshire and Cardiff), and has a global reach through the HLB network. Described as the ‘best performing firm outside of the top 10’ by Accountancy Magazine, Menzies has over 500 employees and an annual turnover of more than £50m. Menzies is a member of HLB International, a global advisory and accounting network.
An award-winning firm, Menzies was 2022 Finalists at the Tax Tolley Awards for: ‘Best Business Tax Team’; ‘Best Employer in Tax’; ‘Best Specialist Tax Team’ (Innovation & R&D); ‘Best Regional Tax Team’. The firm also won the title of ‘Corporate Restructuring & Insolvency Team of the Year’ at the Credit Awards 2022 for the second year in a row and was ranked 6th in the Accountancy Age Mid-tier Power Index 2022. Menzies won the ‘Diversity and Inclusion Award’ at the Tri Awards 2022.
Menzies offers a full range of services – tax (business & personal), corporate finance, audit & assurance, business recovery and forensic accounting, as well as strategic advisory, outsourced services, people solutions, wealth management and business valuations. Visit here for more information.