The stressors of the past few years have highlighted the need for sustainability like never before — and consumers are calling on brands, from small businesses to large corporations, to consider their impact on the world around them and balance sustainability with profits.
More than 6 in 10 Canadian consumers say they’re keeping an eye on the environmental impact of what they consume, and 69% are looking to brands to solve sustainability issues, according to a recent EY Future Consumer Index Survey. Values-based shopping is especially important for younger shoppers, with 63% of Millennials willing to pay a premium for sustainable offerings.
To keep up with consumer demands, small businesses must embrace ESG: a set of standards that consider the Environmental and Social impact of the businesses, as well as its Governance, with the aim to encourage sustainable and ethical business practices. Here, we’ll discuss what ESG is, how embracing ESG can benefit small businesses, and 5 strategies to consider as you center sustainability in your brand.
What is ESG?
ESG is a set of standards investors, regulators and consumers use to measure the environmental and social impact of a brand. It takes a multifaceted approach to sustainability, and encompasses three pillars that each contribute to the business’ impact on the world around them:
- Environmental issues take into account the business’ impact on the planet, and initiatives may include reducing waste, lowering greenhouse gas emissions and reducing pollution.
- Social issues concern equity and equality, and initiatives may focus on fair and equitable compensation, speaking out on social issues and improving diversity within the business.
- Governance standards ensure the company operates ethically, and values transparency with consumers and other stakeholders.
Together, ESG standards help businesses adopt a more holistic view of “success” — one that focuses on the triple bottom line of people, planet and profit.
Why is ESG important?
Beyond the obvious ethical benefits, keeping an eye to your ESG offers several benefits that set businesses up for success:
Access to funding and financing
Lenders, funding organizations and investors alike are seeking out businesses with a strong focus on ESG, and 94% of Canadian investors say they consider ESG in their investment strategy. Embracing sustainability may help your business attract like-minded investors and secure funding or financing.
Greater innovation
The shift to sustainability introduces new ways of doing business — and new problems that customers are looking to brands to solve. Businesses that can meet these changing needs not only attract like-minded shoppers, but leverage sustainability as a key differentiator to gain market share.
Competition for talent
Top talent flock to employers who value ESG initiatives, and nearly 4 in 10 Gen Z and Millennial workers say they’ve rejected a job or assignment that did not align with their values. As a result, highlighting your commitment to social and environmental issues may help you land the talent you need.
Cost savings
Going greener can have a direct positive impact on your business’ finances. Switching to energy-saving alternatives can also reduce utility bills, while cutting down on waste trims costs.
How can small businesses embrace ESG?
Accelerate your journey to greater sustainability with these strategies:
- Fostering a more equitable and diverse workforce
- Change starts at home, so look for opportunities to promote equity within your organization. Ensure you’re following diversity, equity and inclusion best practices for hiring, and set standards for fair treatment and compensation within your business.
- Introducing more sustainable offerings
- As you rethink how you do business, look for sustainable ways to meet consumers’ needs. Rethink (or reduce) your packaging, introduce eco-friendly alternatives to beloved products and services, and consider partnering with innovative, diverse entrepreneurs to bring new products to market.
- Partnering with like-minded suppliers
- Your action can have a ripple effect on your industry, so seek out opportunities to improve sustainability across your supply chain. Focus on suppliers that share your values and seek out greener or more socially conscious alternatives when you need to.
- Giving back to the communities you serve
- Create a positive impact close to home by finding ways to serve your local community, such as donating a portion of your proceeds to a charitable organization, pledging to plant a tree for each sale, or donating goods to those in need.
- Making ESG part of your brand mission
- The journey to greater sustainability is a long one, and your brand story and mission should reflect your long-term commitment to ESG. Create a Brand Values page on your site to communicate your progress toward your goals and share your wins along the way.
This article is intended for general informational purposes only and does not constitute legal advice or an opinion on any issue. It should not be regarded as comprehensive or a substitute for professional advice.