Thursday, May 26, 2022
outlook business

Five Reasons Why ESG Performance Is Important For Businesses

Vipul Tuli, CEO – South Asia, Sembcorp Industries, a leading energy and urban development company. 

Five Reasons Why ESG Performance Is Important For Businesses

1 Green enterprises attract investor interest

A sharper focus on ESG is set to become a prerequisite for enterprises seeking investor interest as capital is now being consciously aligned with greener and more sustainable endeavours. Investors, customers and employees today prefer companies that are committed to green transformation and are prioritising sustainable, responsible and ethical practices along with their financial metrics.

2 Lowers cost of capital

Growing evidence across industries indicates that a better ESG score translates to ~10% lower cost of capital as the risks pertaining to compliance, carbon, communities, safety or regulatory shocks that affect the business are reduced.

3 Leads to better resource utilisation

In today’s volatile, commodity price environment, resource efficiency becomes critical. Unit cost structures of tomorrow’s sustainable enterprises will have to factor in more demanding standards for resource utilisation.

4 Builds finer regulatory relationships

Businesses that assume greater responsibility in integrating environmental and social considerations into organisation-wide functioning will ensure they don’t fall short of compliance in an evolving regulatory environment.

5 Green enterprises draw talent

The workforce of today is increasingly seeking purposeful work and an association with responsible and humane organisations. By anticipating and mitigating the ESG risks, businesses will be in a better position to attract and retain high-quality talent.