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Can Small Business Benefit From ESG Criteria?


When ESG started to gain popularity in the early 2000s, many businesses took the mistaken view that it was just an empty PR exercise for reputation risk management. Worse still, many argue that ESG principles are bad for corporate finances in some way.

However, as more and more large companies began to incorporate ESG principles into their business decision-making processes, the truth became clear; Combining ESG is not only good for people and the planet, but also good for business.

Small businesses and startups have lagged a bit behind in recent years in incorporating ESG principles into their business models. Often because they are overwhelmed by the company’s immediate everyday activities, they simply don’t have time to think about the bigger picture.

But they should. Small and medium enterprises are the mainstay of the economy, with more 400 million Small and medium businesses worldwide, they are the main source of job creation globally. Thus, SMEs have the potential to make a huge contribution to the planet if all ESG principles are integrated. Best of all, it’s not only good news for the planet, but great news for businesses as well.

What is the ESG criterion?

Let’s break down the jargon.

Environmental, social and governance (ESG) criteria are a set of standards for the performance of a given company.

Environmental criteria are standards or commitments a company promises to meet in terms of sustainability and its impact on the planet. Social criteria refer to a company’s standards for employees, suppliers, customers and the community. Finally, governance refers to the standards that apply to company management, shareholder rights, executive pay, etc.

Why is ESG important?

At this point, for large companies with a futuristic mindset, ESG integration has become second nature. While skeptics will say that the focus on sustainability is still a means to mitigate larger PR problems, the truth is, the increased focus on ESG criteria is beneficial. we.

The broader public is only aware of the many bleak realities we face in the immediate future regarding climate change, biodiversity reduction, pollution, deforestation, and greenhouse gases. This concern has grown over the past decade, with a majority of countries around the world now saying climate change is the same. great threat for their country.

Governments that have been slow to do this with half-hearted commitments often don’t go far enough to allay public concerns. Although a number of regulations have been put in place to address the enormous impact of large corporations on the environment, meeting these requirements is minimal. Companies doing so are not praised for that.

However, companies are surpassing expectations. These companies are rewarded with loyal customers, happier employees and caring investors.

Other companies have watched market leaders adopt ESG principles and comply, making ESG a priority for all businesses – regardless of size. Companies that focus on social responsibility and sustainability today are sure to be the future champions.

ESG Ranking Explanation
Photo credit: Medium

ESG and Small Business

ESG integration may seem like a months-long process for larger companies, but small businesses and startups really have an edge here. While large companies may have more resources to dedicate to more complex commitments, they are often constrained by the red tape.

Policies and commitments must be agreed between different groups, signed by different superiors, and without the end of other bureaucratic processes to maintain progress. Meanwhile, small businesses almost always have a faster decision-making process.

This means that, while their commitments may not change the world on their own, they can make a huge contribution to small, quick changes. Everything like moving to digital receipts, renewable energy, diversified recruiting and more can all be done more easily and make a bigger local impact.

Not only is the initial impact big, but small businesses that integrate ESG principles are now proving themselves in the future. Regulations will inevitably increase as governments face increasing pressure to meet climate goals. Small businesses that adopt a new normative approach are less likely to be rejected later.

Tomorrow’s targeted customers

Public concern about climate change and social responsibility has an impact on consumer behavior, especially on a generational level.

Millennials and Generation Z are increasingly turning to green, local businesses. Big brands like Walmart and Amazon are increasingly being treated with suspicion and skepticism. Their consumer behavior is more tied to their values ​​than ever before.

For example, the Black Lives Matter movement and the drive it builds in 2020. Companies are expected to go ahead and state their support and loyalty. Those who have done are praised by these generations, while those who refuse are condemned.

Small businesses that prioritize the consumer behavior of the younger generation can integrate ESG principles to align with these values.

Better talent

ESG can also attract better talent for small businesses.

Employees increasingly want to work for a company that does well. This doesn’t mean every company needs to be a nonprofit who is always trying to change the world. But companies need to align with their employees’ values ​​and ethics.

In reality, three-quarters millennials will cut wages to work for a more socially responsible company.

While the exact values ​​and ethics clearly vary from person to person, the vast majority of employees will appreciate a focus on sustainability, social responsibility, and responsible governance.

Businessmen go green

See ESG as an opportunity

All of the above will convince small business owners that ESG is no longer a dull requirement due to changing times. Quite the contrary, it was an opportunity.

ESG integration can help your small business attract new customers, new talent, and enhance your branding. Final, improve your business with sustainable growth.

Those who fail to do this will face losing customers to more socially conscious competitors. To be sure, with times of upheaval ahead, ESG can help build resilience for small businesses that need adoption.

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