Drivers and Value of ESG

Demand for greater transparency on sustainable and socially responsible practices is on the rise. But what are the main drivers behind the ESG movement? And what value does it bring?

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What’s driving the ESG movement?

Demand for greater transparency on sustainable and socially responsible practices is on the rise. According to Mckinsey research, more than 90% of S&P 500 companies now publish ESG reports in some form. In addition, the U.S. is currently considering new rules that would require companies to disclose more details about climate-related risks and greenhouse-gas emissions.

So, what are the main drivers behind the ESG movement?

While some companies are doing it to support their own sustainability goals, derive reputational benefits, or comply with regulations, the majority are being driven to do it by stakeholders as a form of risk management.

Why are stakeholders across the spectrum—investors, lenders, government agencies, consumers, clients, and others—looking at ESG performance?

The answer is simple. ESG provides stakeholders with a way to measure a firm’s long-term viability by more than just profits alone. It helps them assess a company’s risk exposure as well as its potential future financial performance.

Armed with an ESG report, stakeholders can now evaluate the quality of an organization’s business practices and corporate responsibility in a way that used to be reserved exclusively for internal management. In turn, stakeholders are using ESG performance as an indicator for investment decisions and lending criteria.

In terms of risk management, ESG provides downturn protection, particularity during economic downturns. It looks at how a company’s financial position may be impacted by issues such as climate change, fair labor standards, corporate practices and business ethics. In a post-pandemic world, and considering market dynamics, learning to persevere through difficult times may be a requirement of today’s businesses.

Like many organizations, Health First’s stakeholders were the driving force behind the hospital’s ESG initiative. The health system recognizes the need to establish clear targets in order to manage risk, effectively measure their progress against benchmarks, and provide greater transparency in its reporting.

Infographic - what are the main drivers and value of ESG

What value does ESG provide?

While it’s easy to get caught up on the initial investment that goes along with developing an ESG strategy, its value proposition is incredibly high. ESG practices benefit your business in numerous ways, driving value and equating to real dollars and cost savings.

It has been demonstrated that ESG practices promote financial growth, reduce operating costs, fuel optimism, lessen volitivity, boost resiliency, reduce regulatory interventions, improve employee retention and productivity, attract new talent, promote top-line growth, target future consumers, facilitate brand-enhancement, and encourage innovation.

Let’s take a look at 4 ways ESG drives value:

  1. It Promotes Growth. A smart ESG approach makes it easier for businesses to expand and attract new customers. Firms that are transparent, maintain strong community relationships, and comply with government regulations are more likely to be given support and granted access, approvals, and licenses that provide opportunities for growth and advancement.Consumers are also demanding high standards of sustainability and quality of employment from businesses. In fact, according to GreenPrint’s Business of Sustainability Index report, 75% of Millennials are willing to pay more for environmentally sustainable products and 77% expressed concern about the environmental impact of the products they buy.
  2. It Reduces Costs. Although it may be easy to get caught up on the initial investment that goes along with an ESG initiative, it can typically be recouped through operational cost savings. According to McKinsey research, a strong ESG approach can reduce operating costs by as much as 60%. In a world facing an upsurge in operating cost across the board, coupled with supply shortages and the risk of rolling blackouts, even a small reduction in operating costs can have overarching impacts. Companies that shift to more sustainable methods of operation save money through lower energy and water consumption, decreased long-term operations and maintenance costs, and even a sizable drop in insurance premiums.
  3. It Attracts Talent and Boosts Productivity. Companies with an effective ESG approach benefit from attracting quality talent and having longer retention. According to the Cone Communications Millennials Employee Study, 64% of Millennials, which currently make up nearly 75% of the workforce, consider a company’s social and environmental commitments when deciding where to work. Moreover, 83% would be more loyal to a company that helps them contribute to social and environmental issues. The data gets even more convincing when it comes to Gen Z, which is estimated to comprise over 30% of the workforce by 2030. A Lever study found that when it comes to Gen Z, 43% would rather work for a company that gives them a sense of purpose than one that pays more.
  4. It Leads to Greater Government Support with Less Risk of Interventions. Government regulations affect most businesses and the markets they operate in. When strong ESG measures are in place—especially when it comes to the Governance aspect—businesses face less risk from adverse government actions. These businesses attract less scrutiny from regulators, gain more government support and enjoy greater operational freedoms.

Want to learn more? Stay tuned for Segment 4: Implementing ESG in your Organization.

Authors:

Karla L. King, Executive Vice President, Sustainability & Resiliency, AEI Consultants

Karla, Executive Vice President of Sustainability and Resiliency at AEI Consultants, is both an environmental engineer and an attorney specializing in navigating sustainability and regulatory compliance to ensure business continuity and operational objectives. Karla is focusing on sustainable solutions with clients as they focus on Environment, Social, Governance (ESG), climate resiliency, and net zero objectives. Karla holds a BS in Civil/Environmental Engineering from Northeastern University, a MS in Engineering Management from Tufts University, and a JD from Massachusetts School of Law. She is a Professional Engineer licensed in MA, CT, RI, VT, NH, ME, NY, and NC, as well as a LEED Accredited Professional.

Mike Lodge, Director of Technical Services, The Concord Group

With more than 35 years of experience in the building services industry, Mike has supported many higher education, mission critical, healthcare, K-12, commercial, industrial, process and pharma/biotech facilities both domestically and internationally.

In his role as Director of Technical Services, Mike is responsible for building and supporting these service offerings throughout the US and Internationally. His experience in operations management, commissioning, project management, facility condition assessments, sustainability considerations , energy efficiency measures ,field testing and operations and maintenance allows him to fill multiple roles on any project team. He is focused on providing clients with fully operational facilities, well trained staff, identifying potential utility savings with the mechanical and electrical systems and providing a safe, healthy, comfortable environment.

Having grown up in England, Mike enjoys returning home on a regular basis to spend time with his family and friends.

Lauren M. Wallace, Principal, Director of Certifications and Consulting, Epsten Group

Joining Epsten Group in 2009 as an Architectural Designer, Lauren is now a Principal and the Director of Certifications and Consulting. She is a leading sustainability consultant who cares about incorporating sustainable practices throughout the design-build industry. Aligning with the firm’s beliefs, Lauren’s work demonstrates that planning for the long-term can truly pay-off for a project. By working alongside her to integrate widespread sustainability practices, her clients can save time and money, and equally important, attract and retain much-needed talent. Along with her incredibly talented team, she helps uncover the possibilities.

Marianna Moores, Senior Manager, ESG, Epsten Group

Marianna has over 15 years of experience in the sustainability industry, working with owners, operators, and tenants to reach their environmental goals at both the project and organization level. She holds both a BS in Architecture and an MBA in Management of Technology: Global Business from Georgia Institute of Technology. Marianna has served as a consultant on a wide range of asset types including office buildings, corporate interiors, hotels, schools, convention centers, parks, retail, data center, and healthcare. She has extensive experience in LEED and SITES certifications, WELL portfolio management, and corporate sustainability implementation. She is also an experienced certifications reviewer. Marianna specializes in ESG bridge services and multiple certification portfolio management.

The Concord Group is a development + construction consulting firm providing a comprehensive and fully integrated suite of project management controls that mitigate risk throughout the lifecycle of a project or capital program. We specialize in the fields of Owner’s Representation, Cost Estimating, Technical Services (including Energy Modeling, Commissioning, Healthcare Compliance, and Facility Condition Assessments), and ESG and Sustainability Management.

Since 1996, our team of highly skilled construction cost consultants, project managers, owner representatives, cost estimators and engineers have successfully completed over 4,000 projects throughout the United States. We have built a reputation for delivering high quality, accurate and timely work for governmental agencies, healthcare organizations, institutional clients and architectural/engineering firms along with retail, residential and property development companies.

About Concord

Guiding you through the complexities of construction projects, one decision at a time.

Concord is a group of skilled engineers, owner’s representatives, project managers, cost estimators and technical construction advisors.

We offer a fully integrated suite of project management controls that mitigate risk throughout the lifecycle of a project or program, giving you the tools to make informed decisions to reduce risk, drive collaboration and streamline efficiencies across the entire project team.

From concept to creation, our development and construction consultants leverage technology and experience to deliver exceptional results on the most complex of projects.

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