Some think of ESG (Environmental, Social, and Governance) as a stock market or goodwill strategy — criteria that some investors and consumers use to put their money where their values are. Others may consider it a controversial practice.
Really, though, ESG is way for companies to do the world good with a byproduct of better business performance — regardless of the original motivation.
From the consumer point of view, many want to support businesses that do good. Younger generations, especially millennials and Gen Zers, are making responsible choices on where they do business. In the end, companies find that responsible business practices help them build a great reputation, drive brand awareness, and really help increase their bottom line. This can range from going-green cost savings to community service — all of which can improve a company’s top-line revenues.
First there’s the ‘E,’ Environmental. One example of a highly visible and easy-to-implement change: the shift from plastic to sustainable bags or packaging. Switching from plastic bags to reusable ones have been a huge thing for small business owners and a lot of municipalities over the years. It signals eco-responsibility to customers, and it’s a great branding opportunity for your business.
As for the ‘S,’ Social, put simply, it’s doing good for the communities that the business serves. Are you hiring people from the neighborhood? Are your products affordable for these people? Are you giving back? Small businesses have really stepped up over the years with volunteering, making donations and partnering with local nonprofits.
As a business owner, it’s important to make sure you’re supporting causes you’re passionate about, especially inside the LGBT community, so that the dollars stay within the community and younger generations get to see successful LGBT-owned businesses doing good.
Governance, the ‘G,’ meanwhile, relates to an organization’s governing factors including board makeup, shareholder rights, management structure, and company policies.
The key to conveying all this do-gooding is getting the word out there. Consumers have more avenues than ever to hear that story. Larger companies can publish corporate responsibility reports and post them on their websites, for instance, but smaller businesses may not need to be formal about their reporting. Enlist social media, company reviews, and even old-fashioned word-of-mouth to connect and tell your story.
Ultimately, being authentic to your values is what will resonate with customers. Embrace that biggest challenge and be transparent on why the business is doing what it does.
Steven Garibell is the Vice President of Community Business Development Strategy for TD Bank.
