The evolution of ESG: from corporate 'nice-to-have' to corporate necessity

Blog title - The evolution of ESG from corporate ‘nice-to-have’ to corporate necessity

Global, Oct 26, 2023

Authored by Logicalis CEO Bob Bailkoski

Corporate sustainability has become more than a “nice to have”. We are seeing more and more organisations realise the urgency to act not just because of regulatory pressure, but also because they see sustainability as a way to drive business benefits. Environmental and social governance or ESG which considers sustainability policies and ethical practice, is moving out of the shadows and becoming the next big bet in business transformation providing clear shared value.

In fact, the business case for ESG has seen a particularly big shift in the last few years as its move to becoming a mainstream topic has been driven by:

  1. Customer awareness of topics such as climate crisis and organisational impact on the environment, especially as they begin to look at how they can improve their own impacts.
  2. Employees who want to work for an organisation that takes their responsibility to behave ethically and sustainably seriously.
  3. Shareholders who are increasingly seeing the value that businesses with a strong ESG agenda are generating.

This is backed by our recent CIO Report, which surveyed 1,000 CIOs across the globe. The biggest motivators for driving improved sustainability were cited as:

  • Marketing competition (55%)
  • Customer attraction (52%)
  • Employee expectations (45%)
  • Customer retention (45%)

Investors have been one of the early adopters in recognising the shared value of a strong ESG approach. Both investors and regulators, play a critical role in the adoption of ESG with a focus on reporting requirements, standards, and frameworks, moving us towards approaches that increase transparency and accountability for all stakeholders.

As regulatory pressures for businesses to prioritise ESG factors increase, those organisations that are ahead of the curve when it comes to acting and operating responsibly, can leverage this as a clear competitive differentiator. In fact, over the last 10 years various meta-studies have empirically validated that a strong ESG performance is correlated with financial performance. The largest of these studies combined the findings of more than 2000 empirical studies, in which 90% showed either positive or neutral correlations between ESG factors and financial performance. The shared value created through ESG, and responsible business practice is clear and is undoubtedly the next area of business transformation. The question is how can businesses unlock this shared value and how can IT help to further sustainability practices?

Ultimately technology is what has enabled ESG to flourish and create this brilliant, shared value. To gain the competitive advantage available through responsible business practice, businesses need to tightly align their sustainability and technology strategies to truly succeed.

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