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Why Does ESG Matter?

We have all stayed in hotels that have encouraged us to be more eco-friendly by reusing our towels, or read articles where companies expound their environmental initiatives. The first of these led, in 1986, to the term ‘greenwashing’ and more recently we have seen what perhaps now we should call green inflation or perhaps environmental, social and governance (ESG) inflation.

Why does this matter?

Being able to talk about Environmental credentials, to good Social and Governance values will soon be a requirement for any part of the sales process. Some companies are already factoring this in to their investments, or to the people they buy from and many are now beginning to report on it. Before long it will be a standard question to any salesperson and in any sales submission. Therefore, understanding what is ESG and why it matters is important.

Stakeholders in any organisation are becoming ever more critical of companies’ ESG. How this is measured, recorded, and reported and how far back into the supply chain companies go is very much dependent on the skills and capabilities of the people doing the reporting, the tools and access to data they have and, the leadership of the company.

Adding graphene to concrete makes it about 30% stronger. According to Cambridge University this would reduce the amount of cement needed and have a 21% impact on concrete’s contribution to global warming. Should this be one for the developers or for those investing in our offices, malls, and factories of the future? Just working it out is hard enough.

That said, ESG is not just about greenhouse gas emissions, global warming and a company’s carbon footprint. It goes beyond that. Also, it’s not just supply chain. What about outsource partners? How do they record and report and to what standard? Should that be included in the company’s own ESG report? Certainly. It has an impact on the company performance when outsourcing so it should therefore be a consideration for ESG.

ESG is wide-ranging, from workforce learning & development and human rights to greater transparency and, of course, environmental issues and initiatives. From the role the company plays in the local communities and those it serves to its corporate values and ethics. ESG is a broad strategic initiative that has impact right across the business. It therefore will matter soon in almost every major sales call.

In 2019 Volkswagen introduced the ID.3 and claimed it to be ‘balance sheet carbon neutral’. What happens end of life, it seems, is not their problem. A vehicle that is comprised of many items too complex to dispose of efficiently – batteries, composite panels, seats, tyres etc. - has an environmental impact. Should that be factored into ESG calculations? Perhaps not right away but in the future, this may well be the case.

As investors become increasingly vocal on their demands to see environmental reporting, social reporting and governance reporting it falls to the sales team to present that in the best, and fairest, light . Accessing all the data for any company will be difficult but those that start early and get it right will benefit from winning more business in the short term and be better positioned beyond that.

Pressure from investors and executives is not the only thing driving ESG transparency. In 2017 Millennials (1981-1996) became the largest part of the workforce, overtaking Generation X and Baby Boomers. Millennials are, as a group, more socially conscious than most; according to Forbes 79% of Millennials believe Social Responsibility is critical. These are your buyers of the future and the influencers of the sales process now.

You may think ESG is a reporting requirement or something for the finance department. That is true but it is also a sales tool that can be wielded in your favour or be used against you. Having answers that support your ESG credentials matters today and in the near future will matter a whole lot more. Be prepared and know your ESG, you're going to need it!


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