Sustainability has become a pressing concern for businesses across all sectors, as the need to address environmental, social, and governance (ESG) factors has become increasingly apparent. ESG encompasses a wide range of issues, including environmental sustainability, social responsibility, and ethical governance practices.

These elements have emerged as challenges that business owners and investors must tackle. In the business landscape today, having a well-defined sustainability strategy and a roadmap that includes ESG, sustainability, NetZero, or similar initiatives has become imperative.

Below, we dive into the reasons why every business needs to develop a sustainability strategy that incorporates ESG principles.

Rising Expectations

One of the biggest drivers for adopting an ESG strategy is the growing demand from stakeholders, including investors, customers, employees, and communities. Over the past few years, there has been a large shift in stakeholder expectations, with a greater emphasis on sustainable and socially responsible practices.

In fact, 87% of consumers across the globe said they would purchase a product because a company advocated for an issue they cared about. Moreover, 86% of investors consider ESG when making a decision. These statistics clearly indicate the increasing importance of ESG in both consumer and investor decision-making.

Trends and Regulations

Monitoring industry trends and regulatory developments can serve as strong indicators of the need for an ESG policy within your business. Numerous industries, such as energy, manufacturing, and finance, are witnessing significant shifts in regulations and standards to address pressing environmental and social concerns.

For instance, the Paris Agreement on climate change has set ambitious targets to limit global warming, prompting businesses to reduce their carbon footprint and transition to renewable energy sources. Similarly, regulations around supply chain transparency, labour practices, and data privacy are becoming even stricter, influencing businesses to implement responsible practices.

Moreover, if competitors in your industry are already highlighting their ESG stance, it becomes essential to benchmark against them. By doing so, you can identify gaps and opportunities for improvement within your own organisation. Proactively embracing an ESG policy enables companies to stay ahead of regulatory requirements and position themselves as responsible corporations within their respective fields.

Risk and Resilience

Reputational risk is a significant consideration for businesses in today’s world. In the age of social media and instant communication, a single negative activity can rapidly spread, which could lead to severe damage to a company’s reputation.

Adopting an ESG policy can help mitigate reputational risks by demonstrating a commitment to responsible practices and sustainability.

Moreover, an ESG policy can enhance operational resilience by integrating risk management practices. By identifying and addressing ESG-related risks, companies can improve their long-term sustainability and mitigate potential financial and operational disruptions.

Third party Risk Management

ESG monitoring should extend across your business’s entire ecosystem. Effectively managing third-party relationships is a crucial element of any comprehensive ESG strategy.

Risk from any source within the supply chain can have damaging consequences. It is wise for businesses to thoroughly assess the ESG performance of all potential third parties across the spectrum and benchmark their results against a broader pool of suppliers before making a decision on who they select to work with.

Embracing ESG requires careful planning, stakeholder engagement, and robust measurement and reporting frameworks. It’s not straightforward, however guidance and support can make it seamless – such as C2 Risk, helping businesses to develop and implement effective ESG strategies and risk intelligence that align with business objectives.

In the business world today, ESG is no longer a choice but a necessity, an expectation both from customers and investors. By proactively embracing ESG principles, businesses can drive their competitive advantage, attract investors, engage customers, and support their long-term sustainability objectives.

About C2

C2 is a UK risk management scaleup on a mission to help businesses survive and thrive in the digital economy. C2 helps organisations manage security and compliance in a way that’s unique to their business and that does more than simply ticking off digital checkboxes. C2’s industry-leading platform supports the public and private sectors in managing their threat landscape and improving vendor controls, project, privacy, and ESG risks.