Recent years have witnessed ESG advisory firms gain significant traction, showing businesses the way towards sound Environmental, Social, and Governance practices. Businesses, however, are apprehensive about pursuing their ESG goals, considering increased costs. Well, this fear isn’t justified, given that a proper ESG approach can significantly reduce costs and drive the growth of revenue. This explains why successful businesses work closely with established ESG advisory firms to boost revenue streams and reduce costs.
How can ESG mitigate risks while lowering costs?
A disciplined and systematic stance in embracing ESG principles can reduce business risks significantly. This also curtails operational costs.
In the 21st century, businesses have undergone a digital transformation. There’s no denying that the evolution of their digital maturity was a slow process. Similarly, large companies, with their complexity and scale, may require time to realize the full potential of ESG. It is a transformative force having long-term implications. It’s not a quick fix for short-term financial results.
Increasing your revenue through ESG
Regulatory norms often drive ESG adoption by companies. Other factors driving ESG adoption include cost reduction and mitigating risk. It also presents the potential to drive revenue growth. This remains an uncharted territory for many businesses. However, successful companies like Unilever have stood out by embracing ESG policies.
Their approach to embracing ESG helped in making cost savings. Unilever introduced the concept of “Sustainable Living Brands” (SLBs), which embraced strong social and environmental purposes. By 2020, nearly half of Unilever’s sales came from SLBs. Most importantly, there was an impressive 70% improvement in SLBs compared to the rest of the business. As a result, Unilever was able to declare its intention to phase out old brands that lacked a clear purpose. This approach shows how businesses can prioritize social and environmental impact to help customers who have been looking for a deeper meaning in their purchases.
Let’s evaluate the case of Tesla as another instance. Founded in 2004, the company’s commitment to electric vehicles (EVs) has reshaped the automotive industry. With a market capitalization of $650 billion and a cumulative global sale of 4 million EVs, Tesla has outperformed many established automakers.
General Motors, on the other hand, recalled its EV1 electric cars in 2003 and abandoned the EV segment. GM’s market capitalization stands at $37 billion, a fraction of Tesla’s value. Tesla’s innovation-driven approach has propelled its revenue growth, emphasizing the financial prudence of addressing environmental and social concerns.
