E in ESG stands for Environment & Sustainability initiatives . An Enterprise does not operate in vacuum. When it functions, it uses physical assets and Natural Resources. Ethical stewardship dictates that, all organizations must ensure that assets are to be adequately preserved for future generations as well.
Brand Equity represents the total value of a brand as a separable asset, a measure of the strength of consumer’s attachment to a brand and a description of the associations and beliefs of the consumer about the brand. Companies with a positive brand image have higher market value, own a market value premium and generate an intangible asset vis-à-vis industry peers.
ACCA and CIMA give us new perspectives on Brand Equity, Ethics and Environmental Sustainability.
Until recently, the only relevant stakeholder for a company was owners and their dividends. Other stakeholders such as customers, employees, government and future generations were out of the radar. As it is now increasingly clear that all stake owners are important, equally vital are their demands. All the stakeholders now demand companies to be green and environment conscious. This is important not just from the ethical perspective of preserving the natural assets of our Earth for future generations, it is vitally important even to the company bottom-line.
Focusing on environment has 2 pathways to impact a company’s medium and long term profitability. First is reduction in operating cost and the biggest factor is a permanent positive brand image.
The immediate impact by focusing on environment friendly technology is reduction in operating cost. Assets are better utilized and waste is minimized. This enhances asset efficiency and reduces expenses on waste disposal. On the other hand, renewable energy and power saving reduces the fuel bill. If offices have natural sunlight, teams have higher motivation and their productivity increases. Other initiatives in Indian Companies day to day operations include eco-friendly products manufacturing, carbon-neutrality tracking, paper saving, community sustainability involvement, eco-branding, and common among all remains power saving to reduce Greenhouse emissions. Among companies involves are Tata Group, Reliance Group, HCL, HP, Wipro, LG, Samsung, Haier, ONGC, Indus IND bank, ITC and MRF. Global initiatives include sustainable fabrics, recyclable products, fuel efficiency, paint fumes recycling, geothermal cooling, zero-waste, zero-carbon, water-economy, neighboring forest preservation, pro green advertizing, green buildings, trim grass grazing, environmentally aware corporate culture, etc. Companies here include Google, EBay, Starbucks, Nike, Johnson & Johnson’s, Fisher Investments, Disney, Ford, etc.
Apart from these operational initiatives, a long term commitment to environment and sustainability such as Sustainability Panel on website, Integrated Reporting, ISO 14000, etc. create a permanent positive brand. Tata Steel is synonymous with creating Parks and biodiversity preservation, wherever it operates. Elevation Burger proudly announces its environment friendly initiatives at every step. Environment focused Millenials who become purchase decision makers, demand to see Green Accountability. If it is required to price the products at a certain premium but justify that in Management Discussion & Analysis Report by pointing out self induced Green Initiatives, they will continue to have the same customer base, if not more. An example is Coca Cola Replenish Africa Initiative (RAIN), Portable Water Initiative that replenishes ground water. MacDonald’s is making livestock sustainable. Many other initiatives are equally inspiring and all of these companies feature in Fortune 500.
Thus we see a direct correlation between ethics, environment, brand and performance. Long term profitability goes hand in hand with Sustainability because an enterprise respects the fact that they borrow their resources from Nature and they ought to give back to it and preserve HER resources for future generations.
Through this blog series, we see that Governance, Society and Environment are all intimately connected to Profitability and Compliance.