Demonstrated good performance in the realm of environmental, social, governance (ESG) issues is quickly becoming a “needed to play” competency for firms of all sizes. While this is especially true for public-facing companies, this is also true of firms that do not sell directly to the public. Customer-facing companies large and small are increasingly looking upstream in their supply chain to evaluate the ESG performance of those they choose to do business with. Historically, ESG – or Sustainability, which is similar – has been used by a relatively small handful of companies as a way to differentiate themselves from their competitors to selected groups of stakeholders – usually a particular customer base or a particular set of investors. Over the past several years, the expectations of society in general and investors in particular have evolved and now demonstrated good ESG performance is often a prerequisite for favorable attention. In addition to increased favorable views from outside stakeholders, evidence continues to mount that good ESG performance is a predecessor to overall good financial performance.
The integration of ESG strategies into a company’s operations may sound daunting but it can be accomplished through a series of data collection, risk evaluation, and planning activities.