Experts Reveal Impact of ESG Policies and Why Businesses Can’t Ignore It

By Jim Pytell, Managing Editor On Jun 7, 2023

NJBIA today hosted its annual Environmental, Social & Governance (ESG) Conference, where experts revealed the intricacies and importance of ESG for companies, what it means for investment, best practices for implementation at one’s business, and more.

ESG is a framework used to assess an organization’s business practices and performance on various sustainability and ethical issues. This framework is important because investors are increasingly applying these non-financial factors as part of their analysis process to identify material risks and growth opportunities. As a result, businesses have been wise to increasingly use ESG factors in their operations.

“ESG seems like a no-brainer,” said Ray Cantor, deputy chief government affairs officer for NJBIA. “A good business always wants to have those components – working towards better things environmentally, protecting your communities, doing the right things socially, being more inclusive and having a good governance structure.”

However, ESG does not come without controversy, as critics say these investments allocate money based on political agendas rather than on simply earning the best returns.

Though in a world where consumers and stakeholders seem to be becoming increasingly cognizant of environmental, social, sustainability and other non-financial factors when it comes to business practices, proponents say ESG aims to highlight companies that may be riskier than traditional investing guidelines alone might suggest.

“Even if you think that ESG doesn’t apply to you because you aren’t a publicly traded company, you will find that sometimes if you are part of a supply chain to a larger company, for example, these policies are going to be pushed down on you as well, so you can’t just put your head in the sand,” said Cantor.

While ESG itself serves as an alternative to a financial framework of evaluation, there are still financial incentives to businesses.

“There is not just an investor shift, but a public shift as well,” said Kyle Strumfels, CHMM, associate, ESG M&A leader, Langan Engineering & Environmental Services. “People want to do business with companies that have good intentions, and we find that companies that are incorporating all these elements of ESG into their companies are making more money.” 

He added that ESG-proactive companies also tend to have better employee retention statistics, better managed supply chains, and lower risks overall, citing several studies to back these claims. 

While there are countless ESG policies and practices that businesses are implementing in varying ways, a few basic examples include: lowering carbon emissions, increased energy efficiency, diversity, community support, employee engagement, tax strategy, executive remuneration, board structure, anti-corruption strategies, and more. 

“If you are not doing this, you are falling behind,” Strumfels said. “If you want to maintain a competitive advantage – or gain one – you really need to start thinking about all of these things, or at least the ones that are relevant to your business.You can’t do them all at once and you can’t ESG overnight, but you can plan things over time, incorporate things here and there, and make ESG implementation a smooth running thing.”

To access more business news, visit NJB News Now.

Related Articles: