Why should businesses prioritise ESG, even while experiencing falling demand?

ESG factors have become increasingly vital and can determine who will do business with you. As cost pressures continue to rise and economic conditions remain uncertain, it's critical to prioritise ESG to maintain your appeal to the entire business ecosystem.

Neglecting to establish a robust ESG strategy can result in losing access to capital, talent, and the capacity to sustainably manage your supply chain.

ESG: Navigating nine key themes for business value

ESG is a set of environmental, social and governance standards that help measure the sustainability and ethical impact of a company. You might know this about ESG already, but what exactly does it mean for your business? We look at ESG through the lens of nine key themes that we know are vital to achieving value from your ESG agenda.

ESG strategy and reporting

To shape your ESG strategy, you need to identify the priorities most relevant to your organisation. These decisions will be based on both stakeholder expectations and your view of the importance of these areas to the success of your business. Actions should be embedded into your wider business strategy and systems used to monitor progress. Your ESG strategy should be aligned to your purpose and become part of your culture, including engaging current and prospective employees, potential investors and customers.

Climate strategies

Climate change and Net Zero is a major market issue, and regulators and standard setters are aligning around common reporting standards as agents of change.

In response, we are seeing mandatory climate-related reporting for larger sized businesses, funding targeted to tackle climate change and organisations of all sizes being required to transition to a low carbon footprint as a condition of doing business.

Having a climate strategy is no longer just the right thing to do, it is a necessary consideration when meeting regulations and stakeholder expectations. Excluding this area from an ESG strategy could have costly repercussions.

People and social impact

When deciding where to work, considering whether an organisation is inclusive and purpose-led with strong values around ESG can be key in many people's decision-making process. Thinking strategically about factors such as and labour standards, as well as attracting and retaining talent, can help keep yourself as an employer of choice.

For organisations seeking to lead on the ESG agenda, human capital considerations are board issues.

Sustainable and secure supply chains

Supply chain sustainability and security can be core risk considerations for organisations, particularly where critical aspects of the supply chain are based overseas. Ethical risks are heightened as the complexity and geographic reach of a supply chain increases and transparency reduces.

Physical climate risks, modern slavery & working conditions, geopolitical risks, sanctions, bribery & corruption, trade compliance & export controls, access to and the sustainable use of natural resources or changes to the focus of taxation are all key considerations as governments look to green taxation to encourage sustainable change within their economies

You need to ensure that suppliers and partners involved in your supply chain are transparent, adhering to good international practice and legislation, and that you have early visibility of potential cost increases.

Read our latest insight on where mid-market businesses are focusing their efforts for an ethical, sustainable and secure supply chain.

ESG and taxation

For some organisations, tax policy will itself be a driver behind ESG-related business change.

Taxes on the use or production of commodities and products viewed as having negative externalities, such as carbon, non-recyclable waste and plastics, are increasing globally. For other organisations, tax considerations are part of the broader ESG agenda but can add or erode value depending on how proactive an organisation is.

Non-compliance leads not only to costs in dealing with tax authorities but also potentially significant reputational damage with stakeholders and customers.

Sustainable finance

A growing number of borrowers and sponsors are seeking to access ESG-linked financing.

This encourages companies to enhance their ESG commitments, allowing them to achieve better pricing on their loans or bonds.

As ESG momentum is building for the midmarket, businesses must pay attention to their ESG credentials to maintain cost-effective access to capital, potentially as soon as their next financing round.

ESG and governance

Ensuring ESG awareness is embedded into everyday decision-making through governance frameworks, leadership, and culture can be a challenging transformation, but is a priority for an effective sustainability strategy.

Integrating ESG strategies and approaches into governance frameworks will build confidence, instil trust and ensure an in-depth understanding that flows from the board throughout your organisation.

Critical components of sustainable business practice include decision-making frameworks, control and risk practices, culture, board leadership, remuneration structures, reporting and stakeholder impact. Disclosures provide a window onto leadership capabilities and awareness of ESG risks and opportunities.

ESG risk management

With increasing changes in regulatory requirements and stakeholder demands, risk management is integral to the delivery of an ESG strategy. ESG risk management will safeguard your business operationally and financially, protecting your reputation and the interests of key stakeholders.

ESG and non-financial assurance

Due to the complex nature of ESG information it can often be not complete, accurate or relevant. Using or reporting information which is inaccurate or unrepresentative could lead to accusations of greenwashing.

Assurance of ESG data will give you confidence in your ESG information and credibility to stakeholders.

Podcast series

Catch up on COP28

Listen to our daily podcasts from COP28, hosted by Irina Velkvoa, including an interview with Michael Mainelli, Lord Mayor of the City of London

ESG insights

ESG and access to capital: the mid-market needs to stay alert

How is ESG influencing mid-market lending in 2024? Find out with the results of our annual survey of UK-based lenders.

Read more yellow field

Sustainability: From compliance to value creation

A materiality assessment can help you deliver your sustainability reporting requirements and add value to your business.

Read more Sustainability picture

TCFD climate reporting: public sector is now in scope

Public sector entities must report on climate-related risks using the TCFD framework in a phased approach.

Read more TCFD climate reporting: public sector is now in scope

ESG in M&A: what are investors and lenders looking for?

Environmental, social, and governance (ESG) is here to stay. Nicola Sartori explains why embracing it can help you grow your business and attract investors.

Read more ESG in M&A: what are investors and lenders looking for?

People and social impact: key areas for ESG success

Businesses must understand how to effectively embed diversity and inclusion (I&D) and determine what they should report regarding social impact. Our experts provide clear guidance when it comes to people and social impact.

Read more People and social impact: key areas for ESG success

Sustainable and secure supply chains

Where mid-market businesses are focusing their efforts for an ethical, sustainable and secure supply chain

Read more Sustainable and secure supply chains

Capital Thinking: how the mid-market can maintain access to capital in 2024

What mid-market firms can do to help maintain their access to capital in 2024 and beyond.

Read more Capital Thinking: how the mid-market can maintain access to capital in 2024

Actions to take to maximise the impact of your energy strategy

Here are ten practical actions you can take to reduce costs and meet your emission reporting commitments. The webinar's expert speakers shared key steps for cost-effective energy strategies and maximizing their impact.

Read more Actions to take to maximise the impact of your energy strategy

Lessons from the FCA’s diversity and inclusion survey

The FCA has published their findings on diversity, equality, and inclusion strategies and initiatives in financial services. Tina Bhardwaj explains how you can use the review as guidance to improve your own culture.

Read more Lessons from the FCA’s diversity and inclusion survey

Carbon trading: a scheme for reducing emissions?

Can carbon credits trading reduce global emissions? Schellion Horn, Ryan Williams, and Riley Lovegrove look at China’s pilot cap-and-trade system.

Read more Carbon trading: a scheme for reducing emissions?

New rules on scope 3 emissions directly affect mid-market borrowers

A borrower's carbon emissions profile will become as relevant to a lender as credit risk in determining who to lend to, and on what terms.

Read more New rules on scope 3 emissions directly affect mid-market borrowers

A conversation on the future of whistleblowing

We co-chaired The Future of Whistleblowing. This event sought to explore what the future of whistleblowing looks like, as new legislation aims to redefine whistleblowing in the UK through the creation of an ‘Office of the Whistleblower’.

Read more A conversation on the future of whistleblowing

Investigating the Church’s links to the Slave Trade

The Church Commissioners for England is the financial arm of the Church of England and manages its £10 billion endowment fund. In 2019, the Church Commissioners became more conscious of the fact that the transatlantic slave trade played a significant role in shaping the economy, society and Church of today.

Read more Investigating the Church’s links to the Slave Trade

    How can financial services firms manage climate risks and opportunities?

    Find more insights on the impact of climate change on the financial services industry and the importance of incorporating climate risk into risk management practices.