Over the past two years in particular, businesses have seen an increase in a focus on sustainability through the lens of ESG – environmental, social and governance. ESG is based on the understanding that non-financial factors materially impact a company’s performance, and therefore should be considered in investment decisions. While some organisations have been embedding ESG into their business strategies for some time, for others, the term ESG, and what it means for their business, is still relatively new.
Businesses that fail to address ESG risks may be more likely to experience reputational damage, reduced revenue, boycotting, supply-chain issues (for example linked to COVID or climate change), missed opportunities for new products, new markets, and cost savings, and in some cases litigation. Conversely, the benefits of integrating ESG into business strategy may include increased returns and financial performance, access to new and emerging markets, increased resilience to market fluctuations, improved ability to attract investment, increased employee attraction and retention, and particularly for smaller companies, an opportunity to ‘stand out from the crowd’ of their peers.
In response to this increasing focus on ESG and the potential benefits it brings to business performance, Melanie Brown, an environmental and social performance specialist at ERIAS, presented a paper on this issue at the Australian Pipeline and Gas Association (APGA) Convention in October 2021.
The paper discusses some of the trends in the energy sector, in particular, how the sector is responding to an increased stakeholder focus on ESG and provides a pragmatic framework to help businesses integrate ESG into their business strategy (summarised below).
ESG Maturity Matrix
ESG Integration Matrix
This framework provides a useful tool to support the development of an ESG strategy and action plan to help businesses set the vision, implement the right actions to address material risks, and demonstrate the impact to the businesses’ stakeholders. If you would like to understand more of how ESG could be applied in your business contact us here.