Why is ESG growing in importance?

In the past, such issues were often seen as “nice to have” but not essential in the same way as a business’s legal or financial responsibilities.

However, increasingly ESG factors are playing a greater role in every area of the economy, from retail to technology, property to finance and across the private and public sectors.

The major benefits of improving your ESG can help in a wide range of areas including:

Access to finance: it is now commonplace for ESG assessments to be carried out by institutional and individual investors before making a decision on whether to put money into a company. More and more banks and other financial institutions also offer loan facilities at more attractive rates to businesses which meet certain ESG criteria while lenders such as HSBC offer preferential rates and even cashback on loans for projects which improve companies’ sustainability credentials.

Reputation: businesses which score well when it comes to ESG are held up as examples of great corporate citizenship, with accompanying positive profile raising; those who rate poorly on ESG criteria face an increasing risk of being ‘called out’ in the media, via campaign groups, journalists or activist investors with the potential to cause serious damage to their reputation, standing and their bottom line. Just look at how activist investor Cevian is making companies like Vodafone and Unilever change their practices.

Customer/client sales: consumers are increasingly drawn to spend money with businesses that score highly on ESG factors and shun those which are shown to fall short. A recent survey found that over 84% of consumers said they were more inclined to be loyal to a brand whose values aligned with theirs. In B2B circles, many clients also have their own ESG scores to think of and so will include ESG factors in their final purchasing decision. Another survey found that business leaders are increasingly likely to turn down working with companies whose ESG does not come up to scratch. And since 2021, public sector organisations have been required to expressly evaluate ESG-related factors in their procurement exercises with a minimum 10% weighting given to those factors when making procurement decisions.

These are just a few of the reasons why ESG can’t be ignored.

What should I do about ESG?

Too many times, companies view ESG as part of their regulatory burden – a box to be ticked so they can carry on in their business as normal. As a result, responsibility for ESG issues is hived off to a company’s HR and regulatory function where compliance is the beginning and end of its function.

However, this approach means companies don’t make the most of the opportunities ESG offers as well as increasing the risk of failing to communicate those values across the organisation.

Instead, ESG should be at the centre of operations, accessible to all functions from finance to sales and used as a tool to drive the business forward.

Seeing ESG as an opportunity rather than a burden could revolutionise how you approach your business – and bring some major rewards.

Read on to find out more.

Can ESG really boost my business?

Oh yes.

Outdoor clothing company Patagonia was founded in 1973 by climber Yvon Chouihard and its mission statement is “we’re in business to save our home planet”.

Among other things, Patagonia:

• commits 1% of its total sales to environmental groups
• operates an online auction-style platform for direct sales of used Patagonia clothing
• donated the $10 million it received from corporate tax cuts in 2017 to “groups committed to protecting air, land and water and finding solutions to the climate crisis”
  
• contributed 100% of sales from its Black Friday 2016 event to environmental organizations, totalling $10 million
  
• suspended advertising on Facebook and Instagram because they believed too little was being done to curb hate speech on the sites
  
• has a venture capital arm, Tin Shed Ventures, which invests in environmentally and socially responsible start-ups
  
• aims to become carbon neutral by 2025
  
• is no longer producing its clothing with corporate logos added because “adding an additional non-removable logo reduces the life span of a garment, often by a lot, for trivial reasons”

Many of those activities would seem to fly in the face of commercial common sense, even if they are good for the planet.

So how is that working out for them?

Sales in 2013 were at a healthy $570m but since then they have grown well past the $1bn mark. Patagonia operates more than 100 retail stores across the US, Europe, Japan, Argentina and Chile and employs around 2,300 people. The company has some of the most loyal customers of any brand in the world and founder Yvon Chouihard is now a billionaire.

The secret?

“Customers become advocates of brands because they develop an emotional connection with their core purpose. Brands that elicit advocacy provide a value beyond just product quality and experience. This connection is something that deserves analysis, as it is the foundation of true loyalty.” – former Patagonia CEO Michael Crooke

Patagonia is also an example of a Certified B Corporation, a movement which is growing in popularity and media profile.

What is a B Corporation and how could my business become one?

Businesses which want to make a point of their purpose and have that independently recognised can apply to become a Certified B Corporation.

B Corp Certification shows a business is meeting high standards of verified performance, accountability, and transparency on factors from employee benefits and charitable giving to supply chain practices and input materials.

To achieve certification, a company must:

• Demonstrate high social and environmental performance by achieving a B Impact Assessment score of 80 or above and passing a risk review.
  
• Make a legal commitment by changing their corporate governance structure to be accountable to all stakeholders, not just shareholders, and achieve benefit corporation status if available in their jurisdiction.
  
• Be transparent by allowing information about their performance to be publicly available

Certified B Corps have to be verified every three years to show they are continuing to improve.

The number of B Corps has grown over the past few years and there are now over 5,000 of them in 80 countries across 154 industries.

As the B Corp movement has grown, so has the profile of the companies involved with major recent features in publications including The Times, The Guardian, Reuters, Forbes, This Is Money and the Wall Street Journal.

Harrogate Spring Water has been a B Corp since 2020 when it became the first North Yorkshire company to gain B Corporation certification.

The company had to demonstrate its accountability, performance and transparency across a range of factors including environmental impact, employee benefits, charitable giving and supply chain practices.

Among its achievements, Harrogate Spring Water:

• is the first UK Natural Source Water producer to adopt a ground-breaking >50% post-consumer recycled content (rPET) across its entire range
  
• has sent zero waste to landfill from its Harrogate site for over a decade
  
• has 100% recyclable packaging across its product range
  
• has its Harrogate site powered by 100% renewable energy, resulting in zero Scope 2 carbon emissions

We recently helped Harrogate Spring Water to put together its latest B Corp impact report outlining the company’s continued improvements to its ESG commitments and to boosting its B Impact Assessment score.

How should I publicise my company’s ESG work?

When talking about your ESG commitment and living your values, getting communication right is key.

Media organisations and the public at large are becoming increasingly sceptical of companies’ claims of responsible business and care for the planet.

The term ‘greenwashing’ is on the rise in the wake of activities which portray a company as environmentally friendly when in practice it is anything but – take this recent example from the BBC of how an ambitious tree planting scheme ended up in costly failure. That’s why such activities need to be very carefully planned and executed in order not to backfire.

In a similar vein, it is true that talk is cheap – warm words need to be backed up with concrete actions.

A good example of this is long-standing Cool Blue client Barker and Stonehouse.

The company approached us to help communicate its sustainability strategy to customers, press and key stakeholders. Here’s what we did.

How we can help? 

Cool Blue has experience in helping clients of all sizes in a wide range of sectors with their ESG needs.

We can help you with:

• Formulating your ESG strategy – what should go in, what should be left out and how to make it really work
  
• Drafting and design – making your strategy say the right things and ensuring it looks as good as it sounds
  
• Communicating ESG across your audiences – ways to make everyone from your bank to your budding customer understand what you are doing and why
  
• Activations that do good and get noticed – creating eye-catching and authentic ways to ensure everyone hears about what you are doing
  
• Helping retain credibility and make further connections – because an ESG strategy launch is only a starting point