Environmental shifts, unfair labor practices, corruption, and other sustainability issues have been increasing at an exponential rate and have become a major cause of concern for the organizations along with the financial targets. As organizations dive deeper into their sustainability and ESG issues they come to know that how much more they have to work on these to prepare themselves for the future. ESG issues a wide spectrum of the issues which are not related to the financial analysis of an organization but may have an impact on the financial growth of the organizations. ESG issues have made organizations to re-think on their investment process and decision making, and considering ESG issue while doing so. Organizations must include how they respond to environmental changes, health, and safety policies, managing their supply chains and corporate culture.
ESG issues are reshaping business models all around the globe and a sustainable economy has a different meaning for different industries. For the agriculture industry, it is poverty elimination and increased productivity of small farmers by introducing new technologies to increase the yield in water-scarce areas. For the automotive industry, it is about having autonomous vehicles that run on clean energy and is expecting the growth of electric vehicles from 3 million to 125 million by 2030. The fight against single-use plastic being dumped into the oceans has revolutionized the ways with which leading chemical and plastic manufacture companies are investing in innovating the recycling infrastructure. For finance, investors are actively considering the ESG issues in their investment approach.
The organizations realize that their efforts are just a drop in the ocean and not sufficient as to what is required. They believe that they either need to maintain their progress at a fast pace or they need to improve their progress rate. They also realize that these ESG issues will have a huge impact on human resources and financial growth. According to a report it has been stated that by 2025, nearly 2/3rd of the global population would be living in water-scarce areas and that around 700 million have to be displaced by 2030 due to water scarcity. Further, with the automation being introduced and an aging workforce, labor markets are also facing challenges related to income inequalities.
Organizations need to have a clear vision about their future and based on that need to have a transformational approach for a sustainable economy. According to a report, the percentage of the companies is going to triple in the next five years and have to follow the industry leaders who have envisioned a long term sustainable growth and have reformed their business model to meet their aspirations. With the ESG issues in mind and reformed business models in the years ahead, organizations will focus more on customer loyalty and revenue generation which will be the key factors in driving sustainability. Today customers are not willing to pay for sustainable goods and organizations have to extend their reach beyond a niche group by incorporating ESG factors in their investment and decision-making process. This will enable organizations to have a value proposition for their customers through innovative and creative product attributes such as improved customer service and affordable pricing.
With a 360 degree view of the ESG issues, investors and organizations have better oversight into it which enables them to make better and informed decision making and also enable them to improve their risk management profiles.
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