In its very essence, Environmental, Social, and Governance, or ESG, is a competitive advantage for businesses. It is because it indicates that your business is doing its part in creating a better world. The invention of ESG is to raise awareness of certain things that need addressing.
Failure to do so would lead to fatal consequences. Businesses are significant contributors to climate change through means of deforestation and also industrial pollution.
Why ESG Matters for Your Business
By handling ESG matters, your businesses can welcome innovation and unlock the business team’s creative ability by developing models that tackle prominent issues.
Aside from this, ESG is also related to the growth of the business. It is especially true since the Millennials, and Generation Z is getting increasingly more conscious about preserving the environment and matters of social justice.
Therefore implementing ESG strategies would attract and retain those customers who put these values on a pedestal. Implementing a proper ESG strategy would allow for sustainable economic development.
Aside from development, investment opportunities would also significantly improve. Venture capital and private equity funds are looking at the ESG performance of companies. Poor ESG management would lead to fallouts and reduce stock prices for investors.
ESG has gained significant importance among inventors, policymakers, and business actors. It is an essential safeguard for businesses from future risk.
The ‘E’ in ESG refers to the environmental aspect as it assesses the impact of resource consumption on a particular industry.
The ‘S’ refers to the social criteria for how businesses interact and communicate with the communities, whereas the ‘G” refers to the governance aspect, which involves the assessment of internal practices and policies that lead to effective decisions and legal compliance.
ESG standards are not limited to a particular size of business. Large businesses undoubtedly have the advantage of more resources to look into ESG matters.
However, small businesses are expecting to consider focusing on the green economy. Not only would it make them more attractive to potential investors, and small businesses could benefit from implementing ESG themselves.
Benefits of Implementing ESG
Several benefits could be reaped by a company implementing ESG. The first benefit is tapping into new markets and expanding the reach in current markets.
Aside from that, implementing ESG would also allow businesses to benefit from cost reductions and combat rising operating expenses. The third benefit is the increase in greater strategic freedom.
A robust ESG implementation can help companies attract and retain quality employees. It directly affects ESG as it helps reduce the risk of adverse government action. It can even allow for more outstanding government support.
It would instill a sense of purpose and generate greater productivity within the workforce. Lastly, investment returns are enhanced as capital is now placed on more promising and sustainable opportunities.
ESG Implementation in Indonesia
For Indonesia, ESG implementation is a top priority. The main reason for this is the applied pressure from foreign investors to create a smooth transition toward implementing ESGs.
Indonesia is attempting to utilize technology as a critical tool to drive inclusive growth. Adopting technology is expected to widen access to health care, education, and employment.
Indonesia has dedicated a financing key to developing ESG potential. In that, there are thematic bonds and also a Sustainable Finance Roadmap issued for this reason.
Those initiatives ensure that investors no need to worry about establishing their business in Indonesia while implementing ESG in the system. Indonesia has increasingly engaged with the agenda of developing climate sustainability within the coming decade.
The country has utilized its position as the G20 President in 2022 and ASEAN Chair for 2023 to develop and showcase its steps regarding ESGs.
The Challenges and Potentials
The main challenge from a business standpoint to implement ESG practices is hiring employees with sustainability expatriates. The issues faced in Indonesia differ from those encountered in the United Kingdom or the United States.
The transition plans must be curated and tailored to address and overcome their concerns. However, Indonesia has excellent potential in renewables, agriculture, forestry, and green manufacturing sectors.
Implementing ESG can be tricky but has a multitude of benefits. Companies looking to do so should consider hiring InCorp Indonesia (formerly Cekindo) to tackle other administrative matters, such as business licensing and company registration.
It would give companies a more hands-on approach to the more important and strategic development parts.