ESG can transform businesses, helping them become more profitable, efficient, and resilient in uncertain economic times.
FPM ESG Lead, Aveen McShane says, Northern Ireland faces greater challenges than Great Britain or the Republic of Ireland in the fight against climate change. Our top industries are heavily dependent on nature, our loss of biodiversity is amongst the worst in the world, and we currently have the highest carbon emissions per employee in the UK. To meet the targets set out in the Climate Change Act (NI) 2022, we need to reduce our carbon emissions by 50% in the next seven years.
While businesses have an important role to play in helping Northern Ireland to achieve this target, lack of knowledge is a barrier. Almost three quarters of small businesses (74%) are unsure how to measure their emissions and only 35% have a plan in place to reduce their impact on their environment, according to a recent Federation of Small Business ‘Accelerating Progress’ report. Implementing an effective Environmental, Social, Governance (ESG) policy is an important first step in getting to grips with this challenge.
What is ESG?
FPM International ESG Specialist, Rachel Post, highlights that ESG is a framework to understand how an organisation measures and reports on their performance regarding environmental impact, social responsibility, and corporate governance. By analysing key ESG issues, companies can achieve cost savings, gain crucial competitive advantages, meet regulatory requirements and enhance their ability to access finance. When financial margins are tight, implementing an effective ESG policy can help a business improve its profitability.
- Cost savings – Companies can use ESG to identify areas where they can reduce resources and enhance efficiencies. McKinsey has estimated that this can improve operational profits by up to 60%.
- Competitive Advantage – Customers and investors are demanding that companies become more sustainable and reduce their negative impacts on the world. Millennials and Gen Z customers in particular want businesses to consider their long-term impacts. Companies that neglect sustainability are losing their younger employees, who are opting to work for organizations taking active measures to become more sustainable.
- Reporting and regulatory compliance – Stringent, standardised reporting requirements are being implemented around the world. Additional UK regulations are likely to be implemented soon while Irish SMEs will need to report on their ESG impacts as part of the Corporate Sustainability Reporting Directive (CSRD). Companies that don’t comply risk significant fines. Even businesses that don’t legally need to report on their ESG data may be required to do so by their suppliers.
- Access to finance and insurance – ESG-focused financing is on the rise. Companies that consider reputational risk factors and mitigate concerns may be able to access funds more readily than those who fail to embrace ESG.
FPM Managing Partner, Feargal McCormack believes that ESG has become a critical element of business success. If you need to comply with new government regulations, win tenders, or even lead your industry, now is the time to improve your ESG.
Our qualified experts including Aveen McShane and Rachel Post are on hand to answer any questions you may have about ESG. Our team can support your business in all aspects of ESG—from engaging with stakeholders, conducting materiality assessments, developing a sustainability strategy, setting KPIs and Net Zero targets to compiling progress reports and providing assurance services.
If your business is ready to start its sustainability journey or you want to improve your existing processes, FPM’s ESG experts can help. Head over to our ESG page to find out more or sign up HERE for a free ESG Health Check.