What Problems Will Businesses Without Strong ESG Practices Face?
Out of date reporting processes: Universal ESG reporting standards are inevitable. Companies that begin addressing ESG issues now, if they haven't already, will be better placed to meet what may be new and more burdensome reporting requirements. Delaying could result in a costly transition process to establish the systems and processes required for compliant reporting all at once. Further, it is often difficult to obtain truly quantified ESG numbers.
Higher interest rates or reduced access to funding: Some financiers are now offering lower rates for companies that demonstrate a positive social and environmental footprint. Similarly, businesses that don’t have strong ESG practices may have challenges accessing finance and investment in the future. Establishing strong practices now can act as a futureproofing and risk management exercise to ensure access to funds in the future.
Excessive waste: Running a business creates waste in all areas, particularly within IT when assets such as laptops, tablets and mobile phones break or become outdated. Disposing of your company’s waste incorrectly can result in the contamination of landfill sites presenting a significant environmental risk for organisations that use large amounts of technology.
Reputational damage: Stakeholders and customers expect companies to evaluate the impact of their actions on society when making decisions. If a business is not seen to take ESG seriously it could have a negative impact on its reputation with a flow on effect to its sales and revenue performance.
Cybersecurity: Using old, outdated assets long past their useful life and the manufacturer’s service support can result in increased cyberattack risks for an organisation, not to mention higher internal IT support costs and operational expenditure. With cybersecurity risks and attack points changing rapidly, organisations need to have strong IT processes in place to avoid sensitive company data being hacked.
Talent attraction and retention: Just as investors and financiers have come to expect demonstrable ESG practices from organisations, so to have current and prospective employees. Without a strong ESG framework, your organisation may miss out on attracting and retaining the best talent in your sector.
Increased risk of shareholder activism: In the event of shareholder activism on issues such as ESG, your company my face increased instability and uncertainty which can impact shareholder value, the company’s reputation and ability to attract further investment in the future.
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