Both publicly traded and privately held businesses must address environmental, social, and governance (ESG) challenges. We believe that better-informed, more strategic business decisions may be made via early consideration of and attention to material environmental, social, and governance (ESG) factors. However, fewer than 50% of boards of privately held companies evaluate ESG-related threats and opportunities. As a result, we think it's critical to collaborate with the firms in our portfolio to help them proactively address the unique ESG challenges they face.
Two-thirds of businesses are making efforts to reduce energy consumption. More and more people are beginning to realize that the climate calamity will be far more difficult to deal with than the Covid pandemic was. Conscious customers, defined as people who place a premium on issues like environmental impact and sustainability when deciding who to do business with, are driving purchasing trends.
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By 2023, it will be crucial for businesses to have shifted their ESG procedures to the core of their operations. The first step is to collect data on how a company's operations affect the community and environment. From there, we can work to improve communication and hold companies to higher standards of responsibility and openness. Every company requires a plan that lays out its objectives and a timeline for accomplishing those objectives in order to lessen the negative effects. Planning and evaluation should extend beyond the confines of the organization to include the full supply chain and the Environmental, Social, and Governance (ESG) credentials of suppliers. Forgetting the negative effects that data centers and cloud service providers have on the environment is a common occurrence.
Latest ESG Trends 2023 to watch
Some of the latest ESG trends you should watch in 2023 are -
Supply Chain Transparency
The biggest ESG trend for 2023 will be consumer pressure for supply chain transparency.
Supply chain transparency is expected to be a major consumer trend in 2023. Customers are more concerned about the origins of their goods and the long-term viability of the businesses they support.
Businesses in a more Ethical and Sustainable manner
80% of the major corporations in the world have reported being vulnerable to physical or market transition risks because of climate change. Customers care about whether or not a business operates in an ethical or sustainable manner, and those who have made ethical or sustainable purchases are more likely to brag about it. This has the potential to boost PR, brand image, and consumer confidence, which in turn can boost sales and customer retention rates.
Social Media
The importance of social media engagement and carbon-conscious product development will grow at many companies. It's not just the two major political parties that can benefit from the persuasive potential of social media. Companies need to watch what they say and do on social media if they want their customers to have faith in them. They must also consider how the general public views their products, and how that view may evolve over time as consumers learn more about environmental concerns and other topics related to sustainability.
Energy efficiency and carbon footprint
Concerns about energy efficiency and carbon footprint are examples of low-carbon design considerations that businesses will need to give careful attention to. If an architect commissions a building without taking these factors into account, the company may run into trouble later on when trying to win approval from regulators who may not approve the project on the basis of aesthetics alone.
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ESG methods will be promising
Methods of gauging environmental, social, and governance (ESG) success will evolve.
As businesses become more interested in ESG metrics, new tools will become available for monitoring their progress. Promising results have been found in assessing the effects on the environment. Carbon emissions per worker or water consumption per worker are two indicators that can be used by businesses to gauge their environmental impact.
Donation and CSR activities
Metrics are also gaining popularity in the realm of gauging the social impact of a certain initiative. Volunteering at a local school or community center, donating money to a good cause, and similar activities all fall under this category. Also, by using these indicators, investors can see the positive impact they're having on society by supporting businesses that donate to worthy causes or hiring people from underserved communities who might otherwise be unemployed due to a lack of relevant experience or education.
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SDGs will gain traction among businesses
More businesses will begin using ESG data in their operations, in addition to increasing their adoption of the SDGs. This is due to the fact that it is becoming more evident that ESG data may aid businesses in assessing their performance on environmental and social responsibility metrics. Understanding the implications of these aspects for a company's bottom line is crucial for its future success. By employing ESG measures as part of their decision-making process, organizations can discover possibilities for improvement or areas where they require support from other stakeholders (such as investors) (such as investors).
Improved clarity regarding regulatory and policy frameworks is to be expected
Regulations and policy frameworks are terms you may be familiar with, but do you really know what they entail? Regulations and policy frameworks are significant because they serve to define the rules that govern an industry or organization. These restrictions include topics like how much pollutants can be emitted from factories; how much rubbish should be deposited into landfills; whether or not water must be treated before being used by customers (and so on) (and so on). If there is evidence of misconduct, a corporation that does to comply with these standards may be subject to fines or even criminal charges.
Demand for eco-friendly goods and services can be anticipated with the help of AI
One of the most encouraging developments in ESG is the application of AI for customer behavior prediction, as stated in the study. Machine learning can be used by businesses, for instance, to determine which clients, given their shopping histories or other characteristics like demographic information, are most likely to buy their items. Over time, observing these trends will reveal information on how various demographics engage with a business, allowing you to better target your marketing efforts.
Raw material supply networks will open up to public scrutiny
One of the most important developments in ESG is the increased visibility of the raw material supply chain. This will allow businesses to monitor the flow of resources and determine where they come from, which can help them achieve sustainability and social responsibility targets while also reducing their environmental effect.
Greenwashing will become less widespread
68% of American company executives claim their businesses have engaged in greenwashing. The phrase "greenwashing" describes dishonest advertising strategies that falsely portray a product or service as eco-friendly when in fact, it is not. The primary motivation for greenwashing on the part of businesses is financial: they want more customers and a better reputation for being environmentally conscious. However, this poses a threat to buyers who might not be able to tell fakes from the real thing.
Sustainable innovation will be led by new technologies
Transformation in the workforce is essential, and not simply from a sustainability standpoint. Sustainable innovation relies on new technologies, and these technologies are transforming our jobs, our homes, and our leisure time in ways that call for trained professionals.
New technologies are spawning previously unimaginable occupations
Businesses who want to start adopting AI and ML, however, have a problem: how to educate their staff. Workers require education to stay up with these technological developments; they'll have to study hard and study fast if they want to keep their jobs.
Read Also - How Businesses Can Improve Their Sustainability Performance With ESG
Conclusion
A shift is occurring in the ESG landscape. Companies will continue to devise innovative methods of integrating sustainable business practices into their operations and investments as they come to appreciate the value of doing so.
A company's long-term plan must include a focus on enhancing the company's sustainability performance. In this approach, they may boost their ESG scores and track the progress of their efforts along the way. This article outlines the five most effective methods for businesses to integrate their ESG initiatives into their day-to-day activities and reporting.
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SG Analytics, a leader in ESG Consulting services, offers bespoke sustainability consulting services and research support for informed decision-making. Contact us today if you are searching for an efficient ESG integration and management solution provider to boost your sustainable performance.
