Home Blog Why Investing in ESG Matters for Your Business Business Advisory | ESG Advisory | Indonesia Why Investing in ESG Matters for Your Business InCorp Editorial Team 31 January 2025 5 minutes reading time Table of Contents What is the Meaning of ESG? What is the Purpose of the ESG? Pros and Cons of ESG Why is ESG Important to Business Strategy? Does ESG Investing Make a Difference? How to Incorporate ESG into Your Company ESG has become essential in driving sustainable business growth and long-term profitability. Understanding the meaning of ESG in business is essential as it directly impacts a company’s reputation, risk management, and investment potential. As investors and stakeholders emphasize ethical practices and sustainability, businesses integrating ESG into their strategies are better positioned to enhance value, mitigate risks, and seize new market opportunities. What is the Meaning of ESG? ESG stands for Environmental, Social, and Governance (ESG). ESG is a framework designed to assess an organization’s business practices and performance regarding sustainability and ethical issues. It also helps assess business risks and opportunities in these areas. In the capital markets, some investors use ESG criteria to evaluate companies and guide their investment decisions, a strategy known as ESG investing. Understanding the meaning of ESG is crucial. ESG efforts contribute to a company’s broader sustainability goals, positioning it for long-term success through responsible corporate practices and strategies. What is the Purpose of the ESG? ESG reporting aims to provide stakeholders with relevant and reliable information to evaluate a company’s ESG performance, risks, and opportunities. ESG meaning to promote company transparency, accountability, and comparability, allowing stakeholders to make informed decisions and assessments based on standardized metrics and disclosures. Leading companies increasingly share reporting as standalone sustainability reports, but it can also be integrated into annual reports or filings within regulatory frameworks. READ MORE:5 Ways To Integrate ESG Investing into Business GrowthIs The ESG Implementation Strategy Beneficial for Business?Responsible Investing to Avoid Recession Through ESG Investment Pros and Cons of ESG The benefits of ESG practices for investors and companies include: Sustainable Returns: Sustainability funds often match or outperform traditional funds, as shown by 2022 Morningstar data. Customer Attraction: Companies emphasizing ESG appeal to consumers and business clients prioritizing these factors, driving growth. Positive Investment Choices: Companies adopting ESG focus on environmental and ethical issues, aligning with the “triple bottom line” framework. Talent Retention: ESG initiatives enhance employee satisfaction and motivation by providing a sense of purpose. Cost Reduction: Implementing ESG practices can lower operational expenses, such as energy costs. However, potential drawbacks of ESG practices include: Lack of Universality: ESG strategies suitable for one company may not work for another, complicating management. Inauthentic Efforts: Companies that superficially adopt ESG risk customer backlash and damage to revenue and stock value, exemplified by greenwashing. Variable Stock Performance: Strong ESG practices do not guarantee stock success; external factors can impact performance. Portfolio Diversification Challenges: Investors focused on ESG may need help to create a balanced portfolio aligned with long-term goals. Complex Reporting: ESG reporting can be challenging due to the disconnect between ESG factors, financial data, and inconsistent standards. Why is ESG Important to Business Strategy? Understanding the importance of ESG practices is essential for companies seeking to enhance risk management, reputation, and long-term success in today’s competitive landscape. Risk Mitigation ESG is vital for managing risks. Companies with strong ESG strategies can better prevent issues that lead to fines, reputational damage, or legal liabilities, thus safeguarding financial stability. Future-Proofing By investing early in ESG, companies position themselves for success, prevent losses, promote diversification, and unlock new opportunities through innovative solutions to environmental and social challenges. Reputation With consumers increasingly aware of environmental impacts, companies prioritizing ESG are more likely to attract customers, build brand loyalty, and enhance their market reputation. Supply Chain Resilience The COVID-19 pandemic highlighted vulnerabilities in global supply chains. Strengthening ESG performance can enhance resilience, as risks in one area can affect the entire supply chain. Marketing Initiatives Promoting socially responsible practices on social media can boost business. A strong ESG score influences consumer preferences, helping attract a new customer base. Email marketing can also be an effective way to promote your business and using a DKIM testing tool can ensure that your emails are delivered securely and with authenticity. Does ESG Investing Make a Difference? Investors increasingly view companies with strong ESG performance as less risky, more resilient over the long term, and better equipped to handle uncertainty. The impact of ESG on companies is significant, as those prioritizing sustainability and ethical governance experience enhanced reputation and stronger financial performance. Companies that adapt to the principles of stakeholder capitalism may gain a competitive edge compared to those that revert to traditional business practices. Guide to Doing Business in Jakarta Mailchimp Free eBook Indonesia Business Insight Contact Full NameEmail I have read InCorp's Privacy Policy and agree to InCorp using my information provided to contact me about related content, and services.*Subscribe How to Incorporate ESG into Your Company To create a comprehensive and effective ESG strategy that supports your business goals, meets stakeholder expectations, and promotes long-term sustainability, follow these steps: Evaluate Existing Practices Assess your existing operations and create a clear ESG approach that aligns with your business goals. Understanding the meaning of ESG is crucial at this stage, as it enables you to pinpoint areas for enhancing your sustainability practices. Engage Stakeholders Communicate your commitment to ESG principles and integrate sustainable practices into your operations. This engagement demonstrates what ESG means for your stakeholders, fostering transparency and collaboration. Promote Diversity Foster a diverse workplace and monitor performance to ensure accountability in your ESG efforts. Recognizing the importance of diversity in the ESG meaning can enhance your company’s reputation and performance. Cultivate a Sustainability Culture Encourage a company-wide culture of sustainability that involves all employees in the transition. Employees who understand ESG are more likely to embrace sustainable practices in their daily tasks. Seek External Partnerships Collaborate with experts for guidance and support in implementing your ESG strategy. These partnerships can deliver valuable insights into your industry and help you refine your approach. Implement Change Management Facilitate the transition from traditional to sustainable practices through effective change management initiatives and improve your ESG rating. InCorp can be your solution by providing tailored business advisory services with ESG advisory and helping you navigate the complexness of implementing sustainable practices while ensuring your strategy aligns with your business goals and stakeholder expectations. Understanding what an ESG rating means will also guide your efforts to enhance your company’s sustainability profile. Fill out the form below to achieve meaningful change and foster long-term success for your business. Read Full Bio Verified by Daris Salam COO Indonesia at InCorp Indonesia With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships. Frequently Asked Questions Is having audited accounts mandatory? Audited financial statements are required for: Entities gathering funds from the public (e.g., banks, insurance companies) Entities issuing debt instruments Publicly listed companies State-owned enterprises Companies with assets and/or turnover exceeding IDR 50 billion Entities mandated by legislation Can investors own shares with preferential rights? Under Indonesian Company Law, shareholders can hold shares with various preferential rights, such as voting rights, nomination rights for board members, priority dividend or liquidation proceeds, and options for conversion or withdrawal after a set period. Get in touch with us. Lead Form Subscribe Full NameEmailPlease provide corporate email where possiblePhone NumberOffice SetupWhich city are you planning to expand into?JakartaSemarang/Central JavaBali/LombokBatam/SumateraSurabaya/East JavaOther ProvincesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration + Office Package (20% OFF)[SPECIAL PACKAGE] Product Registration + License Holder (20% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration + Office Service (20% OFF)[SPECIAL PACKAGE] Comprehensive Industrial Package (15% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration + Office Service (20% OFF)[SPECIAL PACKAGE] Comprehensive Industrial Package (15% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration (25% OFF) + Office Space (Private Office 30% OFF)[SPECIAL PACKAGE] Company Registration + Investor KITAS (25% OFF)[SPECIAL PACKAGE] Accounting + Tax Services+ Annual Fintax Report (20% OFF)[SPECIAL PACKAGE] Payroll Services for Executive Role (20% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -[SPECIAL PACKAGE] Company Registration (20% OFF) + Office Service (25% OFF)[SPECIAL PACKAGE] Company Registration + Micro Finance Services (25% OFF)[SPECIAL PACKAGE] Property Assistance: Due Diligence + AJB Purchase/Lease Agreement (25% OFF)Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesType of Service- Please Select -Business SetupAccounting and TaxHR & Payroll servicesImmigration ServicesProduct Registration and ImportCompliance and Secretarial ServicesBusiness AdvisoryMore ServicesServices Company Registration Renting Virtual and Serviced Office Mergers and Acquisitions Business and Import Licenses Corporate Recovery and Insolvency Closing of Company (Dissolution) Land and Property Ownership Shelf Company Local NomineeServices Accounting and Tax Reporting Audit and Review Transfer Pricing Compliance Tax RefundHuman Resource Sub Services Payroll Outsourcing Employer of Record Recruitment and HR Establishment Employment ServiceServices Business Visa Work Permit and KITAS Dependent Visa (Spouse and Family) OtherBusiness Visa Subservices Business Visa Visit Visa Visa ExtensionServices Medical Device Beauty (Skincare and Cosmetic) Food and Beverage Health Supplement Household Product Halal Certification TrademarkServices Legal Consultation Legal Agreement Service Due Diligence and Background Check Company Documents RevisionBusiness Advisory Business Advisory Services ESG Reporting & Advisory Internal Audit Risk ManagementMore Services Market Research and Analysis Local Distributor and Partner Bank AccountMessageSubmit What you’ll get A prompt response to your inquiry Knowledge for doing business from local experts Ongoing support for your business Disclaimer The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind. We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials. We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website. More on Business Advisory Exploring Business Opportunities in Lombok with a Business Visa Read more Business Set Up Indonesia: Overview Read more How to Obtain a Tourism Business License in Indonesia Read more