To remain competitive in increasingly volatile markets, a company must be able to evolve over time, responding to consumer and workforce needs and offering products and services in line with market paradigms.
The increasing attention given to sustainability issues by regulators, investors, consumers, and many other stakeholders has transformed a company’s ESG performance into a strategic lever for its competitiveness. The benefits of measuring and improving one's ESG performance encompass many aspects: from increased financial stability, to improved brand reputation, to access funding opportunities and projects reserved only for companies that show good ESG performance. Benefits that are as relevant to large companies as they are to SMEs. Despite this, when it comes to ESG performance, companies still encounter several problems concerning metrics and governance.
Sustainability has become a major factor affecting businesses around the world. Through the three dimensions of the Environmental, Social and Governance framework, sustainability has been incorporated into the business activity of many companies and has become an important factor affecting financial decisions. In this context, ESG risks can have a significant impact on the long-term financial performance and reputation of companies.
When it comes to sustainable transition, one of the first areas that companies need to analyse is their business model. Indeed, the sustainability of the business model is the foundation on which not only the success of the organization's sustainability strategies depends, but also its competitiveness and, before that, its very viability over time. In reference to the business model, in fact, sustainability indicates not only the impact of the company and its operations - and those that occur upstream and downstream its supply chain - on the environment or communities where the company is located, but also the economic sustainability of the model over time. This analysis, as well as the work to streamline and improve the critical issues detected, must consider all aspects that impact the company's business model, as well as all areas impacted by the company. In this journey, ESG plays a primary role, as it helps companies to identify those issues and areas where they need to focus on to monitor current performance and develop strategies for improvement.
There is no sustainability strategy that can avoid considering what happens along a company's supply chain. In fact, we know that about 90% of a company's carbon emissions are generated along the supply chain. Despite this, while the number of companies measuring the direct impacts of their operations is increasing, there are still few that measure the impacts associated with everything that happens along the supply chain. This situation is often generated by an undefined and unstructured approach to measuring ESG performance, including unclear governance and accountability, as well as the failure to monitor relevant KPIs. However, failure to monitor supply chain sustainability often comes from the scale of the project. Large companies, for example, are often characterized by long and complex supply chains, which make assessing suppliers’ ESG performance a huge challenge. That is why when it comes to a sustainable supply chain, it is important to rely on the right partners who can help the company deal with all these complexities.
Sustainability reporting has become one of the most relevant practices for organizations willing to prove their value to stakeholders also through their commitment to ESG considerations and environmental issues. There are several sustainability reporting frameworks available to executives, including a few that have become widely used and are backed by international organizations. It is a rapidly evolving set of choices, as an analysis by the Harvard Business review has pointed out. In this context, GRI standards are designed to be an easy-to-use modular set, delivering an inclusive picture of an organization's material topics, their related impacts and how they are managed.
Climate change is shaping our future in many different ways. It is opening new approaches in financing activities too, as investing in projects that aim at reducing the carbon footprint of human activities has become increasingly crucial, both for the planet and for businesses. In fact, there are several opportunities in climate investing. Organizations that embrace climate investing can gain a competitive advantage by differentiating themselves from their peers and positioning themselves as leaders in sustainability. In recent years, there has also been a growing trend among banks to incorporate sustainability and climate considerations into their investment decisions.
A sustainable supply chain requires an integrated approach that involves all aspects of the supply chain, from sourcing to delivery. Every large company’s sustainability effort is tied to their ability to partner and support improvements in small and medium-sized enterprises (SMEs) along the entirety of their supply chain. On their side, SMEs can take the lead and embrace specific initiatives to promote sustainability in their supply chain, seizing a unique opportunity to stand out along the value chain.
As companies recognize the significance of integrating social considerations into their operations, they realise the immense potential benefits that investing and operating according to social sustainability can generate. This article explores the concept of social sustainability and discusses the opportunities it presents for a company.
According to the 2020 Global Sustainable Investment Review by the Global Sustainable Investment Alliance, the global sustainable investment market was valued at $35.3 trillion in 2020, a 55% increase from 2016. The increasing attention to the market has caused the rise of ESG-focused investment products, such as Exchange-Traded Funds (ETFs) and mutual funds, which allow investors to rely more on companies that meet certain ESG criteria. In 2020, ESG ETFs and mutual funds attracted a record $51 billion in net inflows, according to Morningstar.