What Even is ESG?
ESG stands for environmental, social, governance. It is a set of criteria that outlines standards to measure the impact of investing in a business from a sustainability standpoint. ESG is centered around the idea that businesses can and should be interested in the environmental, social, and governmental impacts of their business doings and that investors should hold them accountable in doing so. This is due to the fact that the long term financial success of a business relies on its ability to sustain itself given the environmental, social, and governmental circumstances that it exists within. Whereas sustainability is more of a vague term that companies can use to describe their socially conscious habits, ESG provides measurable standards for companies to uphold. This allows companies to be held accountable for their sustainability practices by investors. It also prevents companies from hiding behind vague efforts to uphold their own definition of ‘sustainability’ and gives investors peace of mind in knowing that their investment is certifiably socially conscious!
Why Your Business Needs to Take ESG and Sustainability Seriously:
Too long have environmental practices and business practices been seen as separate or even conflicting things. Sustainability practices in business go way deeper than putting a composting bin in the company workroom. Instead, they represent a conscious and organized effort to ensure that the way the business is run currently is a way that the business could be run long-term without disrupting the environment to the point of resource depletion. If this is not a reality, businesses must make conscious efforts to remedy this and minimize their company’s social and environmental impact in order to return to a sustainable place. The long-term health of a business relies on the environment’s ability to sustain its business practices. The keyword in that sentence is ‘sustain.’
If a business relies on unsustainable practices it will not be able to stay in business on a long-term basis. For example, businesses that rely on the extraction of non-renewable resources face the threat that these resources will inevitably become depleted. With no source for the production of their products or services, businesses who extract these unsustainable goods and who do not follow the ESG standards will not only fail from an environmental perspective but will not be able to survive long-term on a fiscal basis.
The importance of a company’s sustainability from an environmental perspective has become especially relevant to investors in light of the climate crisis. Clean energy solutions, like those offered at SPH Solutions, have become more desirable to consumers and investors alike as they can make our existence on the earth more sustainable. Companies that do not adopt sustainability practices like these will become obsolete either by conscious consumers concerned about climate change or by the depletion of their resource reserve halting their production. Investors have awoken to the fact that in order to avoid becoming obsolete, companies must implement sustainability practices. Investors obviously do not want to invest in something obsolete, therefore it is in the best interest of businesses big and small to adopt ESG standards for both the earth and the economy. In other words, when calculating potential risks and returns, having non-sustainable business practices does not bode well for your company’s desirability to those invested in its future performance. Implementing concrete sustainability practices into your business using ESG standards will ensure that an investment in its future performance is a smart one, for both business owners and investors!