The increasing attention given to sustainability issues by regulators, investors, consumers, and many other stakeholders has transformed a company’s ESG performance into a strategic lever for its competitiveness. The benefits of measuring and improving one's ESG performance encompass many aspects: from increased financial stability, to improved brand reputation, to access funding opportunities and projects reserved only for companies that show good ESG performance. Benefits that are as relevant to large companies as they are to SMEs. Despite this, when it comes to ESG performance, companies still encounter several problems concerning metrics and governance.
Measuring ESG performances allows companies to cut unnecessary costs
The diverse nature of the benefits associated with adopting a strategy based on ESG performance measurement is related precisely to the heterogeneity of the KPIs monitored by companies. The visibility gained helps to detect inefficiencies in various aspects of the business, starting from the economic sustainability of the business model itself, of business practices related to the use of resources, to the sustainability of the processes.
By monitoring these factors, for example, the company could recognize excessive electricity consumption that may be associated with either a malfunction (such as of a machine for manufacturing companies) or with bad practices adopted in the office (such as leaving lights on in the office even during the night).
By promptly detecting these inefficiencies, companies can take action to promote more sustainable behaviours, which could benefit both the environment and their own budgets. Indeed, the desire to improve one's ESG performance can drive a company to adopt more sustainable behaviours throughout its operations, even with small actions - as, for example, choosing to go paperless - that can help eliminate unnecessary costs and reduce the waste of precious resources.
Good ESG performance allow companies to consolidate and expand their market presence
Good ESG performance is also associated with improved brand reputation with customers. A recent report has found out that, despite inflation, sustainability is a major factor that influences shopping habits: 88% of consumers check the sustainability of a product before purchase at least sometimes; one in five always check.
Also, consumers tend to acknowledge that making a product sustainable could lead to a higher market price and the number of people willing to pay more for a sustainable product has increased as well.
This shows an increased awareness on sustainability issues, with consumers focusing not only on the environmental impact of their shopping habits, but also on the social sustainability of the brand and of the whole process that led that product to the shop. For companies, therefore, focusing on sustainability, improving their ESG performance and obtaining relevant certifications is an important opportunity to strengthen and extend their market position, consolidating the trust of existing customers and attracting new ones.
How ESG performance impact on business opportunities
This consumer attention, combined with increasingly stringent regulatory obligations on sustainability, is prompting many large companies to review their supply chains, asking their suppliers to improve their ESG performance and excluding those companies that are not committed to sustainability.
Thus, a company's ESG performance also has a significant impact on market possibilities for the business that extend beyond the aspects already considered. As we have seen, good ESG performance indicates greater sustainability, including economic sustainability, of the business model. This makes good ESG performance an attractive factor for both investors, banks, and credit institutions.
Elevate business competitiveness by attracting the best talents
If we look into the identikit of consumers more focused on sustainability issues, we see a prevalence of the so-called “Generation Z”. Young people who grew up in an increasingly connected world, where the environmental effects of an unsustainable production system are now a tangible reality.
