What is ESG? Why is ESG important?

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Why is ESG important?

This global sustainability movement is becoming critical as part of a business’ social licence to trade. Businesses that fail to act in this space risk potential impacts on their reputation, market opportunities, and even employee value proposition.

A focus on ESG can do more than just meet growing stakeholder demands. Savvy boards are also recognising the broader business benefits, including the potential to create and sustain long-term value through:

  • Corporate reputation – ESG can enhance a company’s license to operate making it easier to accomplish business objectives and respond to crisis scenarios with key stakeholder groups.
  • Risk reduction – ESG can assist with the identification of immediate and long-term risks depending on the industry and business model.
  • Opportunity management – Shifting market and non-market conditions can expose unmet needs for new products and/or services, potential customer bases, and potential strategic relationships for addressing ESG issues.
  • Culture & intrinsic values – ESG maturity is an indicator of a company’s commitment to building a high-performing, purpose-driven workforce and inclusive culture.

What are the ESG factors?

While there is no universal standardisation of ESG matters, there are some common factors that businesses tend to acknowledge. ESG factors can also be interlinked and may cross into more than one of the environmental, social, or governance buckets.

A BDO Sustainability expert can help you to assess which ESG factors that are most relevant for your business and how to start measuring your baseline. From managing carbon emissions, to diversity and inclusion, to modern slavery reporting, here are some examples of the ESG factors that might be important to your strategy and stakeholders:

ESG Reporting

While it’s not yet mandatory to complete Sustainability Reporting or ESG Reporting in Australia, many organisations are voluntarily making ESG or sustainability disclosures in response to growing supplier, investor, customer or other stakeholder demands. These can be published in annual reports, financial statements, operating or financial reviews, or as standalone sustainability reports.

For further information please visit website:  www.bdo.com.au |  Ph: (08) 6382 4600

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