Integrating ESG: ESG Performance. Why ESG Matters?

 Is Sustainability Really a Cost—or a Missed Opportunity?

Sustainability is often perceived within companies as merely a source of costs and responsibilities, or even as a drain on time and resources. But could it be that this perspective itself is the true waste of time?

ESG performance supports the execution of companies’ targets. Various studies have explored the correlation of the economic results of companies with environmental performance, social performance, and governance performance. Important is to indicate the following:

·   Environmental performance refers to a company’s ability to use natural resources in its processes efficiently.

·  Social performance promotes ethical values and generates trust in its employees, ensuring respect for human rights.

· Governance performance refers to a company’s capacity to efficient corporate management systems and effective processes.

Environmental performance is crucial to efficient operations, reducing the usage of energy, water, and other resources, which reduces costs and improves profitability. Consumer perspective from an ESG point of view is secured by ensuring product safety and responding to society’s preferences. Studies have also shown that positive social impact correlates with higher job satisfaction, which results from a good corporate culture, which can create a good working atmosphere for employees, increasing their sense of identity and belonging, reducing staff, and helping maintain the stability of the company’s daily operation. Hence, scholars have proven that social performance positively influences corporate financial performance. ESG also focuses on management performance that requires incentive schemes focused on sustainable issues, independent and engaged boards, employment diversity, and transparency of risk management. ESG activities have a positive relationship to corporate financial performance. The improvement in the ESG performance of enterprises increases the company’s market value thanks to the positive impact of the company’s financial results. Important for the execution of the article’s purpose is that sustainability performance shall be significant for the long-term success of companies.

Consumers are exhibiting an increasing environmental consciousness and are actively demanding more sustainable products and packaging. Companies are facing significant pressure to minimize their carbon footprint, enhance resource efficiency, and utilize more sustainable materials. Consequently, many companies are investing in sustainable packaging, adopting measures to reduce waste and carbon emissions, and exploring innovative technologies, including biodegradable materials and renewable energy sources. Beyond environmental concerns, consumers are also placing importance on social issues, such as fair labor practices, fair trade, and diversity and inclusion initiatives. In response to these evolving consumer expectations, companies are adapting their strategies to align with ESG requirements. Consumers are now more likely to discontinue support for products or services offered by companies that do not adhere to ESG principles.

Companies are recognizing that strategic alignment in the area of sustainable development is becoming a key competitive factor, influencing consumer preferences and shaping the trajectory of business relationships. In response to evolving conditions, companies have initiated activities to reduce greenhouse gas emissions, distinguishing themselves from others by cultivating a competitive advantage. This advantage is defined as a unique position within the sector relative to competitors, enabling the attainment of above-average profits and surpassing the competition. With the heightened focus on ESG factors, consumers are increasingly favoring brands that emphasize their sustainable attributes. A high level of ESG performance supports achievements in environmental and social issues, making a brand more appealing to environmentally conscious consumers and potentially leading to an increase in market share. This, in turn, can have a positive impact on the company’s financial performance.