For an expanded version of this article, please download our free whitepaper titled ‘The ROI of ESG Software’ for a more in-depth look at the ways in which software contributes to ESG return on investment (ROI), and how to improve ESG ROI with better software implementation.
While ESG and related concepts like corporate social responsibility are not new, they gained a lot of attention and momentum in 2020 due to high level of scrutiny over corporate responses to the Covid-19 pandemic. Stakeholders, including investors, customers, employees, business partners, and regulators, pushed for greater disclosure on ESG impacts and concrete action to improve those outcomes.
More recently, however, there has been some pushback against businesses focusing on areas that don’t directly correlate to profits, especially on proposed mandates for businesses to track and invest in their ESG efforts.
But organizations that have ingrained ESG principles into their strategies have seen how these endeavors can benefit their bottom line. Far from distracting companies from profit-making, a 2023 Infosys survey of 2500 executives found that 90% of them believe their ESG initiatives showed moderately or significantly positive financial returns.
How ESG increases shareholder value
There has been much argument over whether organizations that actively pursue ESG objectives improve shareholder value. What is undeniable, however, is that successful sustainability and ESG-related endeavors add value to organizations and their stakeholders, albeit sometimes in ways that are difficult to measure and align to financial results.
This value includes:
- Access to B2B and B2C customer segments
- Better access to talent
- Improved long-term shareholder returns
- Stronger reputation
ESG and improved profitability
Companies with strong ESG initiatives can see a reduction in various categories of loss, including:
- Capital cost (better loan interest rates)
- Insurance (lower-risk organizations benefit from reduced premiums)
- Employee churn
- Auditing costs (information is properly recorded, curated, and reported, resulting in fewer audits and a smoother auditing process)
- Project delays (due to regulatory interference, activism, or other disruptions)
- Loss of B2B customers by failing to meet their ESG requirements
Improving ESG ROI with better software implementation
ESG is a complex endeavor that involves many teams across the organization. This leads to near-universal challenges when looking to track, collect, and analyze data reliably and consistently.
Because of this, software providers have emerged with purpose-built solutions that address inherent complications with ESG reporting. Using a software solution can offload much of the administrative time and maintenance required, while also automating many key processes.
This allows company leaders to manage the program from an administrator’s seat, rather than going through the traditionally manual processes to review, collate, and report.
Time requirements for data entry can sometimes grind ESG initiatives to a halt. For this reason, look for…
To keep reading, and for an expanded version of this article, please download our free whitepaper titled ‘The ROI of ESG Software’ for a more in-depth look at the ways in which software contributes to ESG return on investment (ROI), and how to improve ESG ROI with better software implementation.