ESG Initiatives Are Adding Real Value

But They're Still Proving Hard To Quantify

Though ESG initiatives have historically been seen as costly public-pleasing exercises, ESG-positive business choices are now often the less costly option for businesses. Over the past several years, there has been a shift in the practicality of ESG practices which aligns many ESG initiatives and investment with the profitability goals of companies.

Studies carried out by McKinsey and NielsenIQ have shown benefits for B2C businesses, as customers now show a definitive tendency towards products which market themselves with a positive ESG angle. For B2B companies, suppliers with strong ESG profiles find a competitive edge by enabling their customers to strengthen their own ESG profiles through supply chain compliance. Moreover, businesses on both sides have found ways to sell excess materials and energy, creating additional revenue streams.

Beyond boosting sales, however, businesses have also reported harder-to-quantify benefits such as greater employee retention, decreased travel expenses, and improved regulatory compliance (which can be a determinant in whether a company maintains permits or certifications).

For businesses, one of the largest challenges to ESG policy implementation is quantifying the returns attributable to ESG initiatives to prove their value to shareholders and potential investors. This is particularly difficult given there is no universal reporting standard (though several such as the GRI, SASB, CDP and IIRC have emerged as frontrunners) which provides a sufficient framework for quantifying returns from ESG initiatives.

Therefore, it is important to spend the necessary time considering actionable ESG policies and how to measure their success. Businesses that can quantify the savings or revenue gained by these initiatives will see greater support and interest from the market. Moreover, those that can balance making their reporting sufficiently detailed, understandable, and comparable will find themselves ahead of the pack as reporting standards improve and regulations increase.