The importance of ESG in taking your food & drink business forward
Welcome to the first in a series examining the importance of ESG for businesses within the food and drink sector.
Part one gives an overview of ESG: explaining what it is and its relevance for customers and investors.
Further articles in the series drill down into the specific areas of Environment, Social and Governance, examining them in detail and the implications for your business.
ESG stands for Environmental, Social and Governance and represents a framework that measures how an organisation impacts the environment and society, and how transparent and accountable it is.
Essentially, ESG provides a more tangible way to measure a company’s performance than corporate social responsibility and is made of up three key pillars:
- Environment: how a company uses energy and manages waste, and its carbon footprint
- Social: how a company engages with the local community, along with its labour practices and human rights
- Governance: how a company manages its board diversity, executive pay and ethical standards
True sustainability
More than simply reflecting your commitment to reduce your carbon footprint, ESG reveals how you run your business, how you conduct your activities and how sustainable you are.
Today, it’s seen as the key measure of sustainability, revealing how you manage the interlinked issues of resources, people and the environment in a way that will ensure current needs are fulfilled, without compromising future generations.
In other words, ESG reveals how you balance your company’s economic performance, environmental care and social well-being.
Driving the future direction of your business
Although not currently a legal requirement, ESG is an important framework for measuring key issues that are of huge importance to customers and investors, and can ultimately help to drive the direction of the products and services being offered by your business.
A study¹ by the IBM Institute for Business Value (IBV) and the National Retail Federation found that purpose-driven consumers - those who choose products and brands based on an alignment with their values - represent the largest segment of consumers, at 44%.
According to the CBI², two-thirds of investors take ESG factors into consideration when investing in a company, which means ESG has the potential to help grow your business, while benefiting the environment and the community.
How commitment to ESG can help to grow your food & drink business
All companies, in particular large organisations, have come under increased pressure to react to ESG factors, such as the use of plastic packaging, environmental impact, workers’ rights, diversity and providing a living wage.
With strong ESG performance leading to positive brand enhancement and perception, it’s essential that businesses in the food and drink sector stay ahead of the curve on such key ESG issues as:
- Addressing concerns about climate change by having targets and showing actual progress in reducing carbon footprint
- Attracting and retaining employees (always a challenge within the food and drink sector) - with factors such as the perception of how a company behaves according to its social conscience, inclusion, diversity and treatment of employees a significant factor in staff satisfaction
- Showing good governance in the form of honest, open and forward-thinking, particularly in relation to sustainability (business reputation can be damaged by the actions of senior management, in relation to how they have managed the business and conducted themselves personally)
The risks of below-standard ESG performance
With suppliers consistently challenged about their commitment to ESG compliance, so ESG performance is becoming a significant factor in supplier selection.
Certainly, increased consumer focus on the ethical standards of their chosen providers, has seen ESG become a more prevalent concern throughout the supply chain, with sub-standard ESG performance potentially curtailing progress and profitability.
In other words, investors want to look at long term sustainable risks, while customers want food & drink suppliers they can rely on and who, in turn, will protect their reputation.
Sources
¹https://www.ibm.com/thought-leadership/institute-business-value/en-us/report/2022-consumer-study
²https://www.cbi.org.uk/articles/esg-a-challenge-for-all-businesses/
How PIB can help
We have a range of tools and products which can assist with your ESG journey, as well as having a strong ESG performance ourselves, making us a suitable supplier for your insurance broking and other risk needs.
Our risk advisory approach to your business goes beyond your basic insurance needs, working in partnership with you to navigate the broader risk landscape.
In addition to insurance broking, we offer a broad range of products including employee benefits and risk consultancy.