Environmental, Social, and Governance (ESG): How green are you?

Environmental, social, and governance is a set of standards that measures how green, socially conscious, and well-run a business is.

Checking your business through ESG standards, you may be able to forecast how sustainable it is in the long run. It is very important to make sure that you understand how significant your business’s environmental footprint, social impact, and governance principles are.

How sustainable is your business?

Environmental – how your business is minimising the impact on the environment?

Social – how your business is affecting your employees and social overall?

Governance – how effective are your business’s governance and risk management tactics?

All these factors can tell you, your customer, and potential investors how is your business prepared for the future.

Environmental

Good data collection is one of the main points. You need to track how your business is affecting the environment. You need to check how much energy and waste your business is consuming. The more in-depth your data is, the simplest it will be to identify areas that need to be improved in your business. It is also, very important to monitor similar businesses to get a more realistic picture of your environmental impact.

You should also be aware of “greenwash” and make sure that you avoid it. Greenwash is when a business is trying to look greener and more environmentally friendly than it is. This includes highlighting your eco-friendly services and keeping silent about others. Of course, greenwashing would not harm the planet but it will have a huge harmful impact on your business reputation. In this case, the main point is to make everything real and make real changes in your business, it will help your business to have a good image and will help you get ahead.

Social

It is not that easy to identify the impact of your business on society but there are a few factors that can help.

Employees – high morale, fair pay, and low staff turnover. These are some of the factors that can help identify a positive workplace culture.

Business owners –should keep customers’ data safe and make sure that their products and services are harmless.

Governance

Integrity, openness, and risk assessment – it is all about governance. To be able to check it you as a business owner need to make sure how the process of decisions making, how fairness, transparency, and accountability are promoted in your business.

Finances will inform key decisions. You should make sure that your accounting methods are up to scratch as it will help to produce accurate budgets and forecasts, keep you compliant and manage risks in your business. Being transparent with investors and stakeholders is also essential to good governance.

Why it is important to meet ESG standards?

Stay compliant

Governments are always trying to protect the environment and tackle climate change by introducing new legislation. At the moment only large businesses need to report their environmental impact in the UK, however, this may change in the future.

Additionally, if your business operates outside of the UK or you would like to do it in the future you should make sure that you comply with international laws.

Thinking about the impact of your business on wider society can help your business meet compliance in the future.

Save money

Making your business environmentally friendly can be a good method to reduce your costs. Reducing the use of water and energy means lower utility bills. Also, going paperless can reduce printing and paper expenses.

A lower turnover rate can also cut down the money and time that are spent on recruitment. Good accounting practices will help you to better understand your business which will lead to better financial decisions in the future.

Your business can receive a grant or a sponsorship from the Government. There are a number of schemes and tax reliefs that are created to encourage businesses to improve their environmental impact. For example, you can enter a climate change agreement to reduce your business taxes or you can claim capital allowances on energy-efficient items.

Secure Funding

Around 66% of investors now are checking the ESG standards of the business when they are looking for an investment opportunity. Considering your business’s influence and your governance principles can reassure investors that their money is in safe hands, helping you secure the funding you need.

Improve your brand image

Nowadays consumers progressed a lot. They are thinking about their social and environmental impact. Showing your commitment to sustainable and ethical business actions can help you to improve your reputation, and brand image and attract more clients.

How to put ESG at the heart of your business

Digital your business

Reducing the amount of paper used in your business can reduce your environmental footprint. Additionally, you reduce business costs as you do not spend any extra money on printing. A digital system will help you to keep the information more clearly and back up your data. Cloud accounting technology can also help you to understand your finance and collaborate easily with your accountant. Access to real-time data can help you ensure that you are working on the most up-to-date financial information. It will permit you to predict accurately and keep shareholders aware.

Listen to feedback from stakeholders

Always ask for feedback from your customers, employees, and stakeholders. It will help future-proof your business. This will lead to business transparency and open communication with your stakeholders.

Work with experts

Independent experts will be able to give you valuable insight into how to prepare your organisation for the future.

Your accountant may advise you on upcoming changes in legislation and offer guidance on how to reduce your business costs while minimising your environmental impact.

Talk to us about your business and what actions you can do to stay compliant with ESG standards.