In recent years, environmental, social and governance (ESG) compliance has become an increasingly important issue for companies across all industries.
Investors, regulators, and customers alike are calling for greater transparency and accountability from businesses when it comes to ESG practices.
ESG compliance refers to a company’s adherence to environmental, social, and governance standards and regulations, as well as its efforts to report on and improve its ESG performance.
Currently, there are a lot of international Non-Governmental Organisations(NGOs)
who are disbursing ESG funding to companies who were compliant with ESG.
So, adopting this concept, aside the fact that, you are aiding the growth of your immediate environment, will also make your company qualify for ESG Funding.
Without just analysing the financial performance of a company, investors are more inclined towards ESG considerations. ESG is likely becoming the heart of mainstream investing as it addresses every aspect of a business – employee happiness, safety of work environment, safety of customer data, potential threats that an organisation may pose to natural bodies or climate changes.
Independent investors and financial institutions use the ESG scores as a proxy to determine the returns of the company and its risks.
The director-general of Securities and Exchange Commission (SEC), Lamido Yuguda, at a workshop on Sustainable Finance stated that, “the revised Nigerian Capital Market Masterplan strongly underlines the need to create awareness and actively deploy educational and advocacy campaigns to promote ESG-compliant products.”
He said that this initiative has been identified to be of high priority, demanding immediate implementation and this is one of the Securities and Exchange Commission’s principal reasons for organising this workshop, in collaboration with our co-hosts, the Financial Centre for Sustainability (FC4S).
The divisional head, Capital Markets at Nigerian Exchange Limited (NGX), Jude Chiemeka, said: “companies on the exchange that demonstrate strong ESG compliance often gain access to more capital, attract a broader investor base, and can even raise capital from foreign markets.
Benefits Of ESG For Companies
Compliance: the ESG disclosure report provides transparency and visibility into an enterprise’s activity for its key stakeholders – consumers, investors, and NGOs. ESG becomes an important requirement if you want to maintain a social license and establish business ties and also explore investment opportunities in other countries. ESG strengthens business resilience.
Investment: the recent pandemic has shown businesses the value of sustainability. Investors in the new normal are looking for sustainable businesses that are mindful of the fair practices in their operations.
Competitive Advantage: in this dynamic business landscape, it is a high priority to stand out in the crowd, not only in offering unique products/services but also in putting your employees’ and customers’ happiness at the top. A good ESG plan should include ways to improve the ethics and commitment to act in the best interests of your employees and customers.
Cost reduction: ESG can contribute to cost savings considerably. Imagine the cost of procuring raw materials. Creating eco-friendly products, innovating with recycling options, redesigning equipment, introducing a fleet of electrical delivery trucks or vehicles to reduce fuel consumption and carbon emissions, offering flexible working hours to employees, and so on.
