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Uzone.id – Today, ESG-oriented investments have experienced a rapid increase. Global sustainable investment now stands at more than $30 trillion, up 68 percent since 2014 and tenfold since 2004, according to McKinsey & Company data.
A company that implements the ESG (Environmental, Social, and Governance) concept implements sustainability. Environmental refers to how a company maintains the social environment.
The social concept emphasizes the company’s relationship with employees, suppliers, customers, and investors. The governance concept will examine how leadership in the company, shareholder rights, and internal control are concerned.
Slowly, companies that apply ESG principles have increased investor interest in companies. This is driven by the increasing social, governmental, and consumer concerns about the long-term impact generated by companies.
ESG has created a new market
Implementing ESG has helped companies tap into new markets and expand into pre-existing markets, providing new growth opportunities.
Research conducted by McKinsey found that 70% of consumers from various industries surveyed are willing to pay extra for environmentally friendly products.
The study also found that companies that engage in social activities that benefit the public and stakeholders have more value than companies that do not implement ESG concepts.
ESG helps reduce operational costs
Implementing ESG concepts in the company effectively helps reduce operational costs. The amount of value will depend on the specific actions the company takes.
Many companies are starting to adopt energy-efficient technologies and practices, such as improving LED lighting, optimizing HVAC systems, or using renewable energy sources, which will lower electricity bills over time.
Not a few companies have also begun to reduce water use and create waste, which will reduce the cost of water payments and waste disposal costs. Moreover, these companies have consciously protected the environment by reducing the negative impact of landfill waste on the environment.
ESG protects companies from governments
Investors are happy to invest in companies that are considered safe, sustainable, and, of course, profitable. Companies that implement the ESG concept have an advantage over companies that do not use similar concepts, namely, reducing the risk of adverse government actions.
Companies with ESG concepts will receive full government support. In some companies that focus on implementing ESG concepts, the government often offers grants, tax incentives, or subsidies that can offset the costs of ESG initiatives.
Companies that consciously and actively manage environmental and social impacts are less likely to face costly regulatory fines, penalties, or lawsuits. In addition, transparent and responsible governance in ESG companies will reduce the risk of legal disputes resulting in expensive litigation and settlement.
ESG will increase employee productivity at work
Companies with clear goals will maintain employee loyalty, increase motivation, and increase overall productivity. Employee satisfaction with the company will encourage them to perform at their best.
In addition, the positive values that develop within the company will help reduce employee turnover, costs, and labor associated with recruitment, training, and onboarding new employees.
ESG creates reputation and loyalty
Not only are investors starting to be interested in companies implementing ESG concepts, but consumers are also slowly switching to environmentally friendly products. Consumer royalty will make them confident to buy products or services at a specific price.
Companies with clear and robust social responsibility and environmental management will effectively build stronger customer loyalty, which will impact significant sales increases.
Applying ESG (Environmental, Social, and Governance) concepts to a company will initially involve a large amount of value. However, over time, companies with ESG concepts can see how operational costs begin to decrease, financial performance improves, and employee royalties increase. This factor makes many investors interested in investing in companies implementing the ESG concept.
