Environmental, social and governance principles don’t just boost a company’s reputation or make it more attractive for investors, but ESG also correlates with higher profits. Report finds that the higher up the corporate management chain ESG was embraced and addressed, the more likely it was to pay off.
The link between ESG and FM
In the corporate world, sustainability is increasingly falling under a new way of thinking about strategies that are good for people, the planet, and profits. Environmental, social, and governance (ESG) strategies are how companies are now organizing their practices under a central umbrella. Facility management hits all three legs of this three-legged stool, as FacilitiesNet points out.
How can ESG correlate with higher profits?
According to new findings of a research conducted by tech and business consultancy Infosys Ltd., when companies care about environmental, social and governance issues, especially in the C-suite, the result isn’t simply an improved reputation. ESG also correlates with higher profits.
“We found that companies with the best financial performance had certain elements in common: an ESG committee on the board, a chief diversity officer and a chief sustainability officer. In addition, they had vested their chief sustainability officer with the authority to clear capital expenditure for ESG initiatives,” – Jasmeet Singh, Infosys, pointed out.
The study showed that a 10 per cent increase in ESG spending resulted in a 1 per cent improvement in profit growth, and the payback on the higher ESG budget was only two to three years. The study also reported that 90 per cent of executives surveyed said their ESG investments resulted in “moderate or significant” financial returns.
However, despite ESG’s clear link to profit growth, budgets are likely to be an obstacle in the current economy. This is worrisome, as companies need to devote more financial resources and to make changes to their operating model to achieve ESG goals and sustain profit growth, the researchers said.
How FMs can relate to the S and G?
In addition to the environmental strategies, it’s crucial to focus on the social aspect as well. That means identifying ways to incorporate best practices of diversity, equity, and inclusion into facility management. The S – social – piece could also include strategies that look to improve an organization’s relationship with its community. Creating standards for diversity in contractors and other aspects of the supply chain is another way facility managers can focus on the social part of ESG.
Facility managers probably have the least control over the G – governance – piece, still, the organization’s governance principles are something facility managers should at least keep an eye on in their own departments. This means setting standards, measuring, analysing, and accurately reporting. It often falls to facility managers to measure and report parts of an organization’s ESG progress.
How to get started with ESG
To get started on ESG reporting, FacilitiesNet suggests facility managers should identify specific strategies and define specific goals. ESG checklists can help focus strategies and allow facility managers to create a manageable action plan. Another good strategy is to form a cross-departmental ESG committee that meets regularly to identify goals, make sure progress is being made, markers are being met, and keep everyone accountable.