What is ESG? Funding Options by Tide explains

Did you know:

• 76% of consumers

  would stop buying from a company that neglected the wellbeing of their employees, environment, or community

• 88% of consumers experience increased brand loyalty for businesses that take a stand on environmental or social issues

• 50.1% of investors believe that companies with higher ESG scores benefit from reduced capital costs

The data is clear … ESG matters to investors.

If you’ve never heard of this term, don’t fret. It hasn’t been around for long. The specific iteration of ESG popularly used today only officially came into mainstream existence in 2004, when it was featured in a UN report that highlighted the commercial benefits of ESG.

What is ESG?

ESG is how well your company performs in Environmental, Social, and Governance matters. It’s used as a measurement by investors to decide if they would like to invest in your business – essentially, they’re trying to figure out what kind of impact your business will have on the world.

‘Impact’ can span many areas, and can be positive, negative, or neutral. This impact is not always intentional – it’s entirely possible for a business to have a negative impact on, say, the environment, without even noticing, simply by way of the company’s energy consumption. This negative impact could then be mitigated through proactive ESG initiatives.

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ESG in action

Imagine you run a small printing press. Producing beautifully bound books and glossy magazines is your passion, but perhaps the paper you print on is not sustainably sourced and is contributing to deforestation.

To rectify this, you could work closely with a certified paper supplier to ensure the paper you use comes from responsibly managed forests. This change could reduce your impact on the environment, which can signal to investors, customers, and employees that your business is open to change and willing to commit to working towards sustainability. This would mitigate and perhaps even reverse some of the negative effects your business has had on the planet.

You could also go a step further, by providing free books to vulnerable members in your local community as part of a scheme. You could partner with schools to provide education books, or you could even produce and deliver visually accessible books to elderly people. This would increase your positive impact on society.

Lastly, a big part of ESG is transparency. An ESG-conscious company could choose to make their processes, including their work in the community, available for possible investors or clients to see.

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Expanded significance

While ESG initially gained traction as a way for investors to determine which companies they’d like to invest in, it has taken on a more expanded meaning and significance for businesses.

Today, many potential employees now also consider a company’s ESG activity to help support their decision when choosing a new employer. Similarly, customers, social media followers, and clients are now known for taking a company's impact on the planet and its local community work into account when choosing to follow a company or purchase one of their services.

Why should I embrace ESG?

If you run a small business, or if you’re not looking to secure the attention of investors, it’s possible you may be wondering if ESG practices are even relevant to you. ESG, as a concept and a framework, has many wide reaching benefits for businesses of all sizes, including:

Bolster recruitment efforts

Employees look for positive markers when deciding which companies to apply to. A positive impact on the planet and a commitment to sustainability could help you attract and retain new talent with greater ease.

Greater resilience

ESG initiatives can support and improve your operational efficiency and result in improved company resilience, positioning you for improved long term success.

Brand affinity

Like job applicants, possible customers want to know their money is going to a business whose values align with their own, ESG can be a helpful way to signal to your future clients that you are a company that cares about your impact on your local community, helping improve brand affinity.

A positive feedback loop

Perhaps you’ve had this before – a client comes in, receives a great service, goes away, and tells all their friends and family about the great work you do, resulting in more clients and a positive feedback loop that ends with you on top. ESG can work similarly to that, the more good you do, the more good you attract.

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Find funding to improve your ESG standing

If you need funding to improve your ESG standing, business loans may be able to help. Business loans can help small to medium businesses grow, manage, and expand their businesses. From providing working capital support, to equipment leases, to commercial mortgages, Funding Options by Tide connects eligible borrowers to our network of over 120 lenders offering finance starting from £1,000.

While applying for a loan will naturally impact your personal or company credit score, the initial check to find out if you’re eligible won’t – just click the link below and submit your details to find out if you could get a loan of up to £20 million.

Find a business loan.

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.