Sustainability in the company: ESG as a driver for long-term success

Sustainability is no longer just a buzzword in a constantly changing business world. Rather, it is a decisive factor for the long-term success of companies.

The term ESG (abbreviation for Environmental, Social, Governance) stands for environment, social and corporate governance. It refers to the three central categories that are taken into account by both companies and investors to assess and manage not only financial but also non-financial factors:

• Environment: This aspect refers to the ecological impact of an organisation. This includes environmental impacts such as energy consumption, CO2 emissions, water consumption, waste management and other environmentally relevant factors.
• Social: Social and societal factors are considered here. These include working conditions, human rights, diversity and inclusion, employee engagement, customer relations and social impact on the community.
• Governance: This refers to how a company is managed and controlled. It includes topics such as corporate governance, transparency, ethics, compliance, consideration of shareholder rights and the composition of the Board of Directors.

The consideration of ESG criteria has become increasingly important in recent years. Companies and investors are increasingly recognising that these factors are not only ethically relevant but can also have a financial impact. Studies clearly show that a positive ESG performance can promote the long-term growth and stability of a company and at the same time have a positive social impact.

In this blog post, I show how companies can benefit from a holistic ESG approach.

What are the main drivers of sustainability?

Various factors influence the spread of sustainability in companies:

• Regulation: Reporting is no longer just a voluntary measure, but a legal obligation for more and more companies. With the Corporate Sustainability Reporting Directive (CSRD), politicians at the EU level have set the legal framework for reporting. Companies must comply with the applicable regulations and report transparently on their sustainability practices. Failure to fulfil these obligations can lead to legal consequences and reputational damage.
• Customers and the market: The increasing demand for sustainable products is having a strong impact on companies. Companies that follow this trend and offer sustainable products can not only gain a clear competitive advantage but can also meet the growing demand and tap into new customer segments in their market. In the B2B segment, companies require their suppliers to demonstrate their ESG performance to justify their status as a capable business partner in the supply chain.
• Employees: Employees expect their employer to behave sustainably. Companies that put their employees at the centre and respond to their needs can not only attract talent but also increase commitment and productivity. Sustainable behaviour is therefore becoming an important factor in attracting and retaining highly qualified employees.
• Competition: Companies are increasingly differentiating themselves through their sustainability performance to stand out in their markets. Competitors are setting new standards through sustainable business practices. To remain competitive, companies must firmly integrate sustainability into their business strategy and actively differentiate themselves from their competitors.

To be successful as a company in the field of ESG criteria, a holistic perspective is essential. Sustainability can no longer be seen as an isolated initiative of a single department:

It is not about managing sustainability. Rather, it is about doing business sustainably.

Companies will therefore only be successful if they position sustainability as an integral part of their corporate strategy.

What challenges need to be overcome?

• Compliance (adherence to CSR regulations): Compliance is the first step on the road to sustainable business success. Companies must not only comply with applicable law but also report transparently on their sustainability practices to create trust.
• Reputation: building a sustainable corporate reputation Companies that do not adhere to applicable standards not only risk legal consequences but also their good reputation. A positive reputation is crucial for the long-term success and loyalty of customers and partners.
• Resources (sustainability in the supply chain): A sustainable supply chain is essential for long-term business success. Companies must ensure that their suppliers adhere to the same high standards as themselves to minimise environmental impact and promote efficiency,
• Markets (response to the demand for sustainable products): Sustainable products are on the rise. Companies must actively respond to the needs of their customers and develop appropriate products and services to secure a sustainable market position.
• Strategy (integration of sustainability into corporate planning): Sustainability must be integrated into the corporate strategy from the outset. Only in this way can companies be successful in the long term, differentiate themselves from the competition and achieve positive social and ecological effects.
• Resilience (building a resilient supply chain): A resilient supply chain is crucial for long-term success. Companies must be armed against external influences such as hacker attacks and supply chain disruptions to remain successful in the long term.

What opportunities can be utilised?

Companies that pursue a holistic sustainability strategy not only assume ethical responsibility but also achieve long-term economic benefits.

This includes strengthening the market position, tapping into new business areas, improving resilience and ensuring sustainable success.

• Competitive advantage: By integrating ESG principles into their corporate strategy, companies can gain a clear competitive advantage. The increasing appreciation of sustainability among customers, investors and employees enables companies to differentiate themselves from the competition. This can lead to an improved brand reputation and customer loyalty.
• Innovation and market development: Sustainability opens up new business opportunities, particularly due to the increasing demand for sustainable products and services. Companies that recognise these needs early on and develop innovative solutions can not only serve existing markets but also tap into new markets. This helps to increase turnover and expand business potential
• Long-term resilience: A sustainable approach supports the development of a resilient supply chain. This is crucial for long-term economic success. Companies that integrate sustainability aspects into their business practices are better equipped to deal with external influences such as natural disasters, geopolitical changes or economic turbulence. This contributes to the stability and resilience of the company.
• Strategy and long-term success: Integrating sustainability into the corporate strategy from the outset makes it possible to view a sustainable business model not as an afterthought, but as a fundamental component of long-term orientation. Companies that pursue this approach are better positioned for long-term success. A sustainable strategy not only supports short-term goals but also contributes to long-term stable success.

Outlook: What opportunities does digitalisation offer?

By using innovative technologies such as artificial intelligence, cloud computing, the Internet of Things and blockchain, companies can optimise their processes, save resources, reduce emissions, create transparency and develop new business models. However, they must also consider the ethical, social and legal challenges associated with digitalisation.

In order to shape digitalisation sustainably and responsibly, it is therefore important for companies to take a holistic approach that involves all stakeholders and is based on shared values and principles.

Companies' digitalisation initiatives have increased significantly in recent years, but the potential is far from exhausted.

It therefore makes sense to dovetail upcoming projects to expand digital capabilities with sustainability initiatives right from the planning stage to leverage synergies and develop entirely new business capabilities.

The concept of "twin transition" describes the interlinking of these two topics.

This interesting solution will be presented in detail in one of the next blog posts.

You can find more exciting topics from the world of adesso in our previous blog posts.

Also interesting:

• Our blog posts on the topic of sustainability