While ESG is causing political posturing, this movement is reshaping the way business is conducted. ESG is redesigning the way corporations operate as well as how capital gets allocated ensuring that risk is priced into decision making and investments. This movement is forcing corporations to establish new internal climate and social baselines and database systems to better understand and communicate their overall impact on society. ESG has not only started to transform how companies currently function but will continue to create new opportunities for companies and individuals alike. “Societal priorities and business opportunity are coming together to transform the way companies craft strategy, drive performance, and report financial results”.There are several ways that ESG is revolutionizing the market that business leaders should be aware of.
Becoming More Technology-Focused
With more companies focusing on becoming more sustainable, technology will be of greater use to help them achieve their ESG goals. Technology is beneficial for various reasons, including its ability to streamline current processes making them more transparent and safer. Additionally, making better use of technology can help reduce the amount of labor that is required to complete specific tasks, thus accelerating decarbonization. All businesses have an opportunity to integrate technologies into their operations and long-term processes. This will help build the foundation for efficient and sustainable outcomes.
Business Transformation
With more use of technology and focus on ESG, companies are poised to experience fast transformation. This is due to new requirements from the regulators to force corporations to change how they interact with society and how they allocate scarce resources like energy and water while limiting waste. While the movement is supply driven to some extent (imposed by policy makers), it is in part the result of large delays to include sustainability and equity into society. The new regulation will force all companies to adjust to a positive impact focus society where consumers will play a more active role. The ESG framework will also focus on greater transparency, safety and training for workers ensuring that all stakeholders are benefiting from business growth.
Changing How You Report Your Business
The changes that a business will experience from incorporating ESG will impact its reporting and disclosures for investors and other stakeholders. The ESG reporting and scoring are likely to become compulsory in all OECD countries by 2025 and all companies should adjust and anticipate these changes.