ESG and the energy crisis
Energy prices have been rising since 2021 and are continuing to do so at an alarming rate. Initially fuelled by a post-pandemic rise in demand for gas and oil that outstripped supply, the situation has been exacerbated by the conflict in Ukraine, sending energy bills rocketing even further. This, alongside a sharp increase in inflation across the globe and a knock-on effect from the energy crisis on the cost of everything, means many businesses are facing tougher financial decisions than they have for a very long time.
We have found that companies with a strong ESG strategy in place are likely to be far more resilient when faced with these growing financial difficulties.
How an ESG strategy can help you
A robust and properly implemented ESG strategy means a better understanding of how your business performs in a variety of key areas enabling you to make more informed decisions about business operations. For example, in the current climate, having clarity around what parts of your business and your supply chain are heavily reliant on fossil fuels will not only allow you to take action to be more sustainable, it will also allow you to monitor those costs and act accordingly. As the cost of energy increases, understanding what you are using and where you are using it has never been more important.
Employing an effective ESG strategy can help combat costs that are rising as a result of the increase in energy prices. There’s a whole range of areas that will be impacted (depending on the sector of your business). From raw materials, to the cost of food, water and equipment – operating costs are increasing across the board. Being proactive in the face of these increasing costs can give your business an advantage over the competition.
So, what are some of the areas where having an ESG strategy in place can help you combat rising costs and aid your business growth as we navigate an uncertain future?
Investors & stakeholders
There is increasing evidence that companies that align to an ESG strategy are a safer option and seen as less of a risk to investors; a 2019 white paper by Morgan Stanley found there was a lower risk associated with sustainably-aligned investments. With investors increasingly recognising a positive relationship between all aspects of ESG and business performance; managing your factors across all three pillars of ESG is crucial. While attracting investors can help business growth and profits, there’s also a clear benefit in having a strong ESG strategy to reduce costs, improve business efficiency, lead business decision-making and drive innovation and profits into the future. This, in turn, has a great appeal to stakeholders (such as business owners, board members, directors, employees and shareholders) concerned with the future growth of the businesses they’re involved with.
Understanding the key reporting metrics that make up your ESG strategy can help inform changes to the way you operate; from fossil fuel reliant businesses switching to electric and hybrid vehicles to paper companies finding new ways of operating that use less water – transformation and innovation can both save you money and put you a step ahead of the competition.
The rules and regulations for your business and its ESG related activities will vary greatly depending on your sector and your location. Rules and regulations around environmental factors, such as carbon emissions and waste management, are only going to become more stringent as regulatory bodies and political lawmakers respond to evidence and societal pressure for more transparency. Being on top of your ESG strategy and being able to show you are compliant to rules and regulations could help you avoid any costly fines. If you are a business that has to go through a tender process to win projects, you will also be at an advantage over competitors who haven’t implemented an effective ESG strategy.
A number of reports reveal that a strong ESG strategy can attract and help retain employees, saving recruitment costs and lack of resource within your business. The green credentials and sustainability focus of organisations can be seen as key factors in why employees choose to work somewhere, with a study by FastCompany finding that nearly 40% of millennials have chosen a job because of a company’s sustainability outlook and the impact they have and 70% saying they would stay with a company with a robust sustainability plan.
Employees with good job satisfaction and a sense of connection to their employer also perform better. According to a study by Forbes – happy employees are 20% more productive than unhappy ones.
The correlation between employee happiness and productivity and financial growth for a business should not be overlooked; a strong ESG strategy that monitors and acts on its environmental factors can help inspire employees and make them feel they are really making a positive difference in what they do.
ESG can also drive consumer-buying habits. According to a study by McKinsey,70% of consumers said they would pay an additional 5% for a green product if it was the same standard as a non-green alternative and 44% of companies surveyed identified business and growth opportunities as the reason for starting their sustainability programmes. What’s more, The Global Sustainability Study 2021 by Kucher and Partners found that 63% of consumers have made a modest to significant shift towards being more sustainable in the past five years with 85% having made some effort to become greener. Businesses will be looking to capitalise on consumer awareness on environmental issues and the growth in demand for companies who care about sustainability and the environment. One of the best ways to do this is to align to an ESG framework and have a strategy in place for monitoring, reviewing and improving the environmental factors across your business.
How we can help
At Turnkey, we can help you form an effective ESG strategy in a number of ways. Firstly, our advisory team will get to know you and your business goals, understanding the key metrics you want to track and how we can create a bespoke plan to help you gain better visibility.
Using our expert ESG knowledge alongside our innovative technology platform, Sustainion, we can plan an approach to ESG that not only ensures you’re complying with regulations but also a strategy that can help you drive efficiencies and save costs.
Given the current economic landscape, driving cost savings may be your number one priority. We can work with you to streamline processes and review best practice to help you save money in a variety of ways:
- Identifying costs associated with the running of your building. We can aggregate data from across multiple buildings and multiple locations, centralising information all in one place to make it easier for you to analyse where you could make changes
- Sustainion can monitor important energy efficiency data such as electricity usage and water consumption and make recommendations, which can help you assess your energy bills
- The platform can analyse additional data like waste management and material use so you can look at alternative ways to reduce costs
Want to find out more about Sustainion and how we can help you build a results-driven ESG strategy?
Get in touch with the team today.
Environmental, Social & Governance (ESG) Tracking & Metrics – A Better Way Forward