ESG benefits for businesses in the digital economy

In recent times, the introduction and widespread application of international standards has led to the need to find a way to effectively combine these standards in a unified management system of the organization and advanced management models such as EGS. This shows that management system standards play a fundamental role, a solid foundation for the advancement of advanced management models, helping businesses overcome technical barriers, individual standards of associations to participate in the global supply chain.

In terms of environment, in addition to the ISO 14001 standard on management systems, businesses have researched and applied the ISO 14064 standard to reduce greenhouse gas emissions, aiming to achieve the commitments stated in the global protocol on greenhouse gas emissions by 2050.

In addition, regarding social responsibility management, businesses have applied international standards such as ISO 26000 or have been certified according to BSCI (Business Social Compliance Initiative), a set of rules for assessing compliance with corporate social responsibility in business.

Investing in ESG is a trend among large companies and corporations. (Illustration photo)

In the Governance area, businesses can apply SEDEX's assessment platform called SMETA (Sedex Memembers Ethical Trade Audit) in conjunction with the ISO 56002:2019 standard on Innovation Management.

Much of the recent media discussion about ESG for companies and sustainability has focused on how sustainability can benefit businesses. But for companies looking to accelerate growth and maximize profits, incorporating Environmental, Social and Governance (ESG) criteria into their policies is becoming an increasingly popular path to success.

We are entering a period of innovation in corporate governance and ESG will soon be a factor associated with all business activities of enterprises in the future.

What is ESG?

ESG factors are those related to taking into account the environmental impact of a company's operations, corporate social responsibility (CSR) initiatives and good governance practices when making decisions. These factors are based on the broader elements of the United Nations Sustainable Development Goals.

By adopting this approach within an organization, it can not only lead to a more ethical way of doing business but also bring tangible financial benefits that play a vital role and are a real driving force in the digital economy .

To understand how ESG criteria can benefit companies, it is important to first understand the three essential pillars of ESG.

One is environmental performance, which includes the company's environmental policies and practices, such as reducing carbon emissions, energy consumption or what is being done to mitigate climate change.

Second, social performance looks at a company’s efforts in social responsibility and how it contributes to the communities it operates in. This could include initiatives such as workforce inclusion and diversity programs, labor practices, or working on projects that benefit the community.

Third, governance, which looks at the company's accountability, ethics, and transparency measures. It also includes how the leadership team is structured and how decisions are made within the organization.

The bottom line is that a sustainable company is one that puts these three aspects at the forefront of its operations, creating a business strategy that actively seeks to improve the environment and uplift local communities while making a profit.

The most important factor in ESG

When assessing the value of a company and making investment decisions, Environmental, Social and Governance (ESG) checks are becoming increasingly important.

Sound corporate governance can protect against non-financial risks and often shows positive long-term performance while also highlighting how well management teams operate relative to their peers. This indicates stability and competitive advantage that can drive profitability and engagement within the business.

This is a question why it is important to consider ESG and sustainability as a three-legged stool in governance and remove one leg that makes it unsustainable.

Score high on the environment while paying a living wage and focusing on manufacturing to make the best product.

Many predictions about ESG will become a big movement in the digital transformation era of companies and corporations. (Illustration photo)

Why is ESG so important right now?

There are many reasons why sustainability is important today as it has been integral to business growth for decades, but the momentum has never been enough to drive adoption on a large scale.

Publicly traded companies are required to submit certain ESG policies or CSR reports to the public, while SMEs are free to do so on a voluntary basis. But the recent COVID-19 pandemic has made SMEs realise how fragile their governance systems are. It has also exposed the vulnerability and disruption of supply chains, combined with multiple weather events that have cost billions of dollars and the scarcity of natural resources.

Worse still, the war between Russia and Ukraine has caused food insecurity across half the globe, and Russia has weaponized its oil supplies to Europe as winter approaches, proving the current business unsustainable.

Why are companies embracing ESG?

Because of the complex developments and impacts on the global economy, many companies are embracing ESG around the world for the most common reasons including:

Enhanced brand reputation: Companies that demonstrate a commitment to ESG are perceived as more ethical, trustworthy and reliable in the eyes of customers, leading to better customer loyalty and a favorable reputation in the marketplace.

Attracting investors: Investors are increasingly looking for companies with good ESG practices. And it won’t be long before these factors are tied directly to finance and investing.

Better employee retention: Companies with good ESG practices tend to attract talent, leading to better recruitment and retention rates and reduced employee turnover costs.

Regulatory Compliance: Governments across the globe are introducing new regulations requiring companies to comply with certain ESG standards, making it necessary for organizations to update these rules.

Increased profitability: ESG-focused companies often have better operational efficiency and cost savings, leading to higher profits over time. By creating sustainable business models, companies can also reduce their risk of being affected by environmental disasters or social unrest.

Investing in ESG is proving to be a great move for companies on many levels. It not only improves their corporate image but also increases profits and supports sustainable business practices.

Companies may not realize how ESG has the potential to increase their value and ensure a livable planet for future generations to inherit. So if a business has never considered adopting sustainable practices, it is not too late because with easy-to-use, affordable tools and user-friendly interfaces, anyone can do it.

Integrating and building a digital economy platform is the best time to start considering the positive impacts of ESG and creating an ESG program as part of a business's sustainable development strategy in the digital age.

Dr. Nguyen Hoang Hiep - Master Tran Anh Tuan

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Source: https://vtc.vn/loi-ich-esg-doi-voi-doanh-nghiep-trong-nen-kinh-te-so-ar770128.html