Is ESG the value add it seems to be?

ESG factors can be material risks to a company’s operations and financial performance
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By Janni Jarvinen
Crisis Response Manager, Navigate Response

Everyone seems to be talking about the latest responsibility trend — ESG (Environmental, Social, and Governance). Even government legislators and global players have taken an interest in the ESG boom, and new policies and targets for more responsible behaviour are arising left and right.

It seems that responsibility trends are increasing across industries and consumers are onboard with the movement. But what really is the ESG hype, and does it have any real value add to businesses? More so, why should businesses, that aren’t in direct interaction with end consumers, get involved?

ESG combines the three central factors of measuring the sustainability and societal impact of a company. It’s a critical element of successful business, because a company’s reputation can be impacted by its ESG performance, as consumers, corporations, investors, and other market participants increasingly prioritise corporate responsibility in decision making. This recent surge of interest in ESG factors among stakeholders is called the “ESG boom”.

The ESG trend has been driven by a growing public awareness of the impact of companies’ activities on climate change and social issues, and of the financial risks and opportunities associated with sustainability and social value.

This change has translated to increased investment in companies that prioritise said factors, and practice corporate disclosure and reporting on ESG issues. Additionally, companies with strong ESG practices are often viewed more favourably, and may be able to attract a larger customer base and a more positive reputation. In contrast, companies with poor ESG performance may face reputational risks, as consumers and investors may view them as irresponsible or unsustainable. So, by investing in ESG projects, your company is simultaneously investing in their reputational capital.

In a crisis situation, ESG considerations can be particularly important for several reasons. As mentioned, companies that prioritise ESG issues are often seen as more responsible and ethical. In a crisis, a strong ESG track record can help a company protect its reputation and maintain the trust of stakeholders. Also, ESG factors can be material risks to a company’s operations and financial performance. For example, a company that is not properly managing its environmental impact may face regulatory penalties or damage to its reputation that can affect its bottom line. By considering ESG risks, companies can better manage and mitigate potential challenges.

Furthermore, companies that have strong ESG practices may be better equipped to weather a crisis. For example, a company that has a diverse and inclusive workforce may be more resilient during a recession because it has a wider range of skills and perspectives to draw upon. Crises can also present opportunities for companies to showcase their ESG commitments and leadership. By taking a proactive approach to ESG issues during a crisis, companies can demonstrate their values and build trust with stakeholders.

So how does one get started with ESG? If you wonder how your company can adopt sustainable and socially responsible practices, especially if you are facing pressure from external parties, here are a few tips on how to begin the process:

  1. Educate yourself about the current ESG issues: It is important to understand the concerns and demands of stakeholders and the public in order to address them effectively.
  2. Engage in dialogue with relevant parties: Consider reaching out to stakeholders to learn more about their perspective and to discuss potential solutions.
  3. Assess the feasibility of demands: Consider whether the demands of stakeholders and the public are realistic and feasible for your organisation to implement.
  4. Develop a ESG plan: Generate a plan to address the stakeholder demands which align with your corporate values and goals, and be open to making changes to your business’s operations and policies.
  5. Communicate your plan: Once you have developed a plan, it is important to communicate it to your stakeholders and the public. Communication of your ESG efforts will build trust and demonstrate your commitment to responsible practices.


Remember, even though the terminology for responsible business practices may change, the basics don’t. Our society is increasingly more transparent and demands accountability from corporate actors – ignorance and unawareness of societal factors is no longer a defence. Corporate actors need to be seen doing the right, the moral thing – not just when it counts but consistently.

Overall, ESG considerations play an important part in the way your company is perceived by stakeholders, especially in a crisis setting, and when done right it can be a valuable asset. So, if you wonder whether ESG is worth the investment, keep in mind that the return on the investment may be the difference between staying in and going out of business, in today’s society.

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