The Rise of ESG and Its Impact on Private and Public Corporations

At a glance

• Main takeaway: Gone are the days when businesses and governments viewed ESG as a niche consideration. It has evolved into a critical component for long-term value creation with a wide range of implications from business strategy and investment to risk management and public trust.
• Impact on your business: Companies and governments that proactively embrace ESG will be better positioned to thrive in our rapidly changing global landscape.
• Next steps: You don’t have to navigate ESG alone. Aprio’s ESG Advisory team can guide you through developing an effective strategy and ensure you meet regulatory compliance.

Let Aprio get you started on your ESG journey? Contact our team for a complimentary consultation.

The full story:

Environmental, social and governance (ESG) criteria is a crucial factor in the business world and plays an important role in shaping a company’s decision-making process. And, as the global climate crisis continues to worsen, sustainability has become a top priority for investors, governments and most of the general public. This heightened focus on sustainability means that both private and public companies need to adapt to new standards, regulations and expectations as climate change continues to create new risks and opportunities at a rapid pace.

The focus on ESG is expected to grow exponentially with significant consequences for both the private and public sectors. So, there are numerous reasons as to why it’s becoming essential for private and public companies to understand all the fundamental aspects of how to best adopt ESG principles into their business strategy, including:

• Attracting investment: Institutional investors and funds are increasingly considering ESG factors in their investment decisions. Companies with strong ESG performance are more likely to secure financing from these sources.
• Risk management: A robust ESG framework helps companies identify, assess and mitigate risks related to climate change, social unrest and governance issues. By addressing these risk factors, corporations can protect their reputation, reduce operational disruptions and ensure long-term growth.
• Legal compliance: Regulatory bodies worldwide are implementing stricter guidelines and regulations to promote sustainable business practices. By embracing ESG principles, corporations can ensure compliance and avoid potential legal consequences.
• Customer and stakeholder expectations: Today’s consumers and stakeholders demand that companies take responsibility for their environmental and social impact. Corporations that fail to meet these expectations risk losing business and damaging their image.

The shift towards a circular economy

The European Union (EU), the United States and other major global actors are pushing for a transition to a circular economy. The circular economy is a model that emphasizes reducing waste, increasing resource efficiency and promoting sustainable consumption patterns. This transition is supported by various regulations and initiatives that are shaping the landscape globally.

Starting with the EU Circular Economy Action Plan (released March 2020), the European Commission has laid out a roadmap to transform the economy through sustainable product policies, waste reduction targets and recycling initiatives. The plan also promotes circular business models and sets the stage for more ambitious ESG initiatives among European companies. Following the example of the EU’s plan, the EPA Circular Economy Initiatives demonstrate that the US federal government is also taking steps to encourage a circular economy by incorporating sustainable efforts to reduce the use of plastic and achieve net-zero emissions by 2050. For example, the Ellen MacArthur Foundation’s US Plastics Pact brings together businesses, governments and NGOs to eliminate plastic waste and pollution. Additionally, US agencies, such as the Department of Defense (DOD), are increasingly focusing their efforts on pollution-free electricity and renewable energy.

International organizations, such as the United Nations (UN) and the World Economic Forum, are working to promote sustainable economy principles globally. These efforts include the development of global standards and guidelines for ESG performance and reporting, as well as the implementation of the Sustainable Development Goals (SDGs).

The bottom line

ESG is no longer a niche consideration for businesses and governments. It is a critical component for long-term value creation with wide-ranging implications for business strategy, investment, risk management and public trust. Companies and governments that proactively embrace these considerations into their operations will be better positioned to thrive in a rapidly changing global landscape.

No matter what stage you are at in your ESG journey, Aprio’s ESG Advisory team can help you develop an effective strategy and navigate you through regulatory compliance. To learn more, contact our team for a complimentary consultation.

Related Resources/Assets/Aprio.com articles/pages

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About Aprio’s ESG Practice

Let Aprio get you started on your ESG journey? Contact our team for a complimentary consultation.