Excellent ESG performance can attract top talent, broaden investment channels, reduce costs and expenses, promote revenue growth, and effectively mitigate regulatory risks, bringing long-term value enhancement to the company. Specifically, ESG practices can profoundly impact a company's long-term development through the following five dimensions:
Attract and maintain an elite team
Currently, more and more fresh graduates and young professionals tend to choose employers who uphold ethical principles and focus on sustainable development, rather than simply pursuing high salaries. For example, a 2021 survey revealed that 51% of American MBA graduates are willing to sacrifice a portion of their salary in support of companies that excel in the field of environmental protection. Deloitte's survey also shows that 49% of Generation Z and 44% of Millennials make career decisions based on personal ethics. In the context of increasingly fierce competition for top talent, neglecting ESG performance may lead to the risk of talent loss for companies. In addition, companies with clear goals often have higher employee retention rates, which can be 40% higher than other organizations.
Expand investment and financing pathways
PwC's 2022 report shows that the demand for sustainable investment opportunities is gradually surpassing the supply. In 2021, ESG comprehensive funds attracted over $500 billion in funding, driving a 55% surge in ESG asset management scale (AUM), and this growth trend is expected to continue in 2022 and beyond. The investor community, from individual retail investors to pension funds, is increasingly concerned about the positive social effects of investment while pursuing financial returns, and is investing more funds in sustainable investment strategies. Gartner's research indicates that in 2020, 85% of investors included ESG factors in their investment decisions, and 84% of institutional investors in Europe plan to increase the proportion of ESG investments. This strong demand provides rich investment opportunities and capital acquisition channels for ESG integrated enterprises.
Realize cost savings
Enterprises can explore the potential for cost savings in their supply chain by improving energy efficiency, reducing resource waste (such as streamlining packaging), and lowering water consumption. For example, Unilever has saved $1.5 billion in costs through sustainable procurement strategies since 2008, while Starbucks' "Green Store" program expects to save $50 million in expenses over the next decade through energy conservation and emissions reduction. Accurately identifying and optimizing key links in company operations can directly drive profit growth.
Drive revenue growth
Developing higher quality and more sustainable products not only helps attract customers, but also opens up new markets. Consumers of all ages (from baby boomer generation to Generation Z) are willing to pay more for sustainable products, with nearly 90% of Generation X consumers expressing willingness to increase their spending for this purpose.
Reduce regulatory risks and social business licenses
As an excellent corporate citizen, by ensuring employee welfare and investing in local communities, companies can effectively reduce negative government intervention risks such as regulatory pressure and fines. At the same time, this also helps to consolidate the company's Social Operating License (SLO), which ensures that employees, regulatory agencies, and the public continue to recognize the company's practices and operational processes. On the contrary, ignoring ESG factors may have serious consequences for companies, such as Barrick Gold being forced to shut down in 2020 due to allegations of human rights violations and environmental damage in its Papua New Guinea gold project, which ultimately led to the government refusing to renew its license. Manhattan Mining Company was also forced to withdraw its plan to build a large mine in Peru due to mismanagement and strained relationships with local stakeholders, leading to protests, road closures, and referendum opposition.
Improving ESG performance is not only a moral responsibility, but also a key factor in directly supporting corporate profitability and ensuring long-term feasibility. At the same time, it helps managers fulfill their trust responsibilities to shareholders and create greater value for a wider range of stakeholders. Enterprises need to strategically integrate ESG factors into their core business, rather than just making superficial or peripheral commitments.