The Reasons Every Business/Company Must Integrate ESG

Environmental social, corporate, and governance (ESG) is a standard that measures the effect of a business on the environment, society, and the degree of transparency and accountability. It is essentially a measure that evaluates a company’s performance concerning its society and the environment in the context in which it operates. ESG evaluates how companies integrate social, environmental, and governance practices into their operations and business models and their effects on them.

If a business is to be successful in the current era, the company must incorporate ESG in its operation. Each aspect of ESG is different in being assessed;

ESG

The environmental component of ESG concentrates on ways businesses can minimize their environmental impact. The most common practices companies must follow include reducing energy use and utilizing renewable energy in production, thereby becoming net zero businesses (having the lowest carbon dioxide emissions). The development of greener products is a service and reducing carbon emissions, just to name some. The company must implement environmental policies to run its business sustainably.

The companies featured on TrendingSocial are judged by the impact they have on society and the business environment they create. Companies can positively contribute to fairness in society and invest in equality of opportunities and conditions for employees and communities. When they evaluate, businesses are required to follow specific procedures to ensure their products and services are safe for the community and that customer information is secure and encourages equality at work.

Governance is the third element of ESG and focuses on how companies make decisions, prepare reports, and manage the processes of running their businesses. It evaluates the ethics of the business’s behavior and its transparency to the public about its actions. The most critical governance procedures that a business is required to follow include detailed reporting to shareholders regarding business strategies, financial practices, and operations, as well as responsibly doing business, for example, the prevention of bribery and ensuring the diversity of the leadership team, and being transparent regarding executive compensation.

ESG

A business that wants to grow and develop sustainably should include ESG in its operations for various reasons. Still, not only that, ESG aids in reducing risk and losses. This is typically a result of the policies on environmental issues that the firm implements, like using renewable energy sources. It also enhances businesses in their reputation since it shows the existence of transparent policies focused on protecting the environment, protecting it, the diversity and equality of society, and ensuring ethical business decisions and processes.

Companies must also consider incorporating ESG to ensure that they attract consumers and employees. Many prefer to work for companies that promote workplace equality and diversity. They also safeguard the well-being of their employees. Consumers have also embraced the movement of ESG. They would like to buy products and services provided by businesses that manufacture products that are sustainable and do not have adverse effects on them. in contrast. They’d also prefer services from organizations that can protect their data. To be sustainable, they will require customers.

One of the companies’ main goals is to increase and earn profits. Companies will take an outside investment strategy to achieve accomplish this. To attract investors, they must be able to offer buy-ins for investors. In light of the current trend toward ESG investing, investors are more likely to invest in businesses that demonstrate the ability to incorporate ESG into their business. According to the PwC 2021 Global Investor report survey, it was noted that companies that fail to integrate ESG are at risk of losing investors. This is due to investors wanting a sustainable investment for their stakeholders and shareholders. In the US SIF Foundation’s 2020 trends report, U.S. assets under management that employ ESG strategies increased to $17.1 trillion at the start of 2020. This is a 42% rise from the $12 trillion in place at the beginning of the year.

In Africa, it is not that many jurisdictions have created legal frameworks for ESG, one reason being that it’s new within the business world of Africa. But all African countries have legal structures to regulate corporate activities. By utilizing these legal frameworks, they’ve been able to define some rules on how businesses must conduct business and ensure that the environment and the society in which they operate do not have negative consequences. Certain countries, such as South Africa, have a specific legal framework for ESG and were created to ensure it is followed.

Although there aren’t as many countries with the legal framework drafted to support ESG, businesses can be sued for non-implementation of ESG. There is a binding precedent that was established from the decisions of cases against companies who haven’t been able to implement efficient ESG examples are cases like Jonah Gbemre V Shell PDC Ltd and Ors (Civil_case 313 of the year 2000), where The Nigerian Federal High Court decided that a right to life is an obligation to live in a clean, pollute-free environment. The court restrained the defendants from flaring gas and ordered the respondents to take necessary steps to prevent further gas flaring. Royal Dutch Shell, one of the six major oil firms, announced that it would make NGN45.9 million to resolve a decades-long dispute over the oil spill during the Biafran civil conflict.

It also led to the development of regulatory bodies that are responsible for ensuring ESG implementation. Some jurisdictions do not have these bodies, but one of them, the Nigerian National Technology Development Agency, is responsible for ensuring that ESG is appropriately implemented. Recently, the agency fined a tech company, Soko Lending Company, NGN10 million for misuse of personal information and a breach of privacy.

Businesses wishing to grow and develop their business should consider ESG as a critical element of their operations and ensure that they implement all of these elements successfully due to the effects it can have on their company and legally.

By Mia

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