Beyond corporate responsibility, sustainability also has become a strategic imperative that aligns profitability with responsible stewardship, mitigates risks, unlocks opportunities and provides economic, environmental and social benefits.
Businesses that embrace sustainability drive cost savings through efficient resource use and carbon footprint reduction and attract conscientious consumers in catering to this growing market demand. As such, companies can boost brand loyalty, reputation and growth. Sustainability also can cultivate a motivated workforce, as employees increasingly seek purpose-driven organizations.
ESG, which stands for Environmental, Social, and Governance, and a parallel component of sustainability, represents non-financial factors used by investors as part of their analysis process to identify material risks and growth opportunities, says Anne Evans, founder of Universal Strategies Limited, which specializes in ESG among several specialty areas. “ESG has become a greater factor in shareholder investment and return,” Evans adds, who also has more than 40 years of experience in the global marketplace with senior government and private-sector business and trade positions.
“So, sustainability is really important,” affirms Evans. “If you look at major company websites, you’ll see that they all have ESG pages. They go into talking about how ESG and sustainability is important to them and their supply chain and their customers. So, for them, their strategy and operations have embedded ESG principles.
“ESG is tomorrow’s reality. So, for any business to be successful, they need to adopt the [ESG] principles,” Evans continues, which also is emphasized on her company website: “A proactive approach to ESG is becoming critical for businesses of all sizes. This includes ensuring their supply chain is compliant.”
As an example, Evans, also a well-known leader and innovator in the global tire and waste industry, points to tire dealers. “Focusing on these ESG principle could potentially give tire dealers a leg up when talking to private equity,” she says.
“It [ESG principles] talks about how the future will be profitable, how they’re set up for the future, and that takes risks away. So, by taking risk away, you’re more profitable, more sellable. It’s just the kind of things you do every day, but you just need to think now in terms of sustainability.”
Evans says she first saw the impact of ESG in the defense and aerospace industry, and it is being passed down to thousands of supply chain companies throughout the U.S. “Supply chain companies are finding that they need to look at how they’re demonstrating their ESG and sustainability because it actually becomes part of a contract.
“And this is really where training is going to become important,” Evans advises. “When you look at sustainability/ESG, it’s really just good business practice with an outline structure. It may, in fact, make the business more profitable, and training and awareness will be the first step.”
Evans identified these three pillars of ESG effectiveness:
1. Environmental: How are you impacting the environment? This is about a company’s energy use, pollution, waste and conservation of natural resources. Are you energy-efficient and utilizing sustainable energy, like solar wind? Do you use electric vehicles? Are you LED-proficient with your lighting?
2. Social: Are you operating your business in a socially sustainable manner? Is your workplace diverse and family-friendly? Does your team reflect the diversity of your community? Are you active in community-betterment activities and encouraging employees to perform local volunteer work?
3. Governance: Are you focusing on your working conditions that show your high regard for your employee health and safety? One ESG aspect in contracts is, does your company comply with all local, state and federal corporate regulations? Companies can talk about what they do and demonstrate to their customers their sustainability efforts through utilizing social media, volunteering, community projects—everything that they’re doing to make a better community.
Brought to you by Motorcar Parts of America (MPA).
