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7 ESG strategies for long-term business growth and impact

7 ESG strategies for long-term business growth and impact

ESG factors have become crucial for driving sustainable business growth, particularly in today’s fast-evolving market. Embracing the principles is not only a moral obligation for businesses in Indonesia; it’s also a vital strategic advantage.

Failing to prioritize these factors can lead to reputational damage, missed opportunities, and difficulties securing investment. Today’s stakeholders increasingly demand accountability regarding a company’s environmental, social, and governance practices.

This article explores how Indonesian businesses can effectively integrate ESG into their operations, enhancing resilience, meeting stakeholder demands, and contributing to Indonesia’s sustainable development goals.

Discover how embedding ESG can mitigate risks, unlock new growth opportunities, and ensure long-term value creation.

What is ESG?

ESG stands for Environmental, Social, and Governance. It is a comprehensive resource for businesses that embrace sustainability while fostering growth.

  • Environmental:

This aspect evaluates an organization’s environmental impact and risk management strategies, including greenhouse gas emissions, natural resource management, and resilience to climate-related risks like flooding and fires.

  • Social:

The social component assesses an organization’s interactions with stakeholders, including human capital management (fair wages and employee engagement) and its effects on local communities. Expectations now also encompass supply chain partners, especially in regions with weaker environmental and labor standards.

  • Governance:

Governance examines how an organization is directed and controlled, focusing on leadership incentives, shareholder rights protection, and internal controls that ensure transparency and accountability.

What are the three principles of ESG strategies?

Environmental, Social, and Governance is based on three core principles: environmental ethics, social solidarity, and governance guidance. Together, they provide a framework for sustainable business practices.

Environmental ethics

Environmental ethics focuses on reducing a company’s environmental impact.

  • Carbon emissions & climate change: Efforts to cut or offset emissions and combat climate change.
  • Resource efficiency: Conservation of resources like water and sustainable waste management.
  • Pollution control: Use of clean energy and pollution reduction strategies.
  • Waste management: Systems for recycling, reducing waste, and safe disposal.

Social solidarity

Social solidarity addresses a company’s relationship with its employees and communities.

  • Community engagement: Contributions to local development and minimizing adverse effects.
  • Diversity and inclusion: Promotion of workforce diversity in gender, race, and age.
  • Labor practices: Fair wages, safe conditions, and employee benefits.
  • Human rights: Upholding workers’ rights and avoiding harmful practices like child labor.

Governance guidance

Governance guidance examines company management.

  • Board structure: Independent and diverse board oversight.
  • Ethics: Clear decision-making ethics and transparency.
  • Transparency: Open disclosure of operations and accountability.
  • Executive compensation: Fair and performance-aligned pay.

Read more: The potential of carbon capture and storage business in Indonesia

ESG goals and targets for the future of business

7 ESG goals for a sustainable business future

To effectively advance their ESG objectives, companies focus on several key initiatives addressing environmental sustainability, social responsibility, and ethical governance.

Reducing greenhouse gas emissions

ESG companies aim to significantly lower greenhouse gas emissions by 2030 to align with global sustainability efforts. This commitment not only helps combat climate change but also meets the expectations of stakeholders who are increasingly interested in sustainable investing practices.

Investing in renewable energy

Businesses are increasing their use of renewable energy, targeting complete reliance on sustainable sources by 2035. This shift towards green energy sources reflects a broader understanding of what ESG means in business, as organizations recognize the importance of transitioning to a low-carbon economy.

Conserving water and resources

Many companies plan to reduce water usage and enhance resource management by 2025. By implementing innovative ESG strategies, these companies seek to reduce their environmental impact while maintaining long-term operational efficiency.

Reducing waste

Organizations are setting goals to minimize waste generation and improve recycling, supporting the circular economy. This proactive approach aligns with corporate social responsibility (CSR) initiatives, demonstrating their commitment to sustainability and resource efficiency.

Promoting diversity and inclusion

By 2030, many firms aim to boost the representation of women and underrepresented groups in senior management. Enhancing diversity is not just a moral obligation but also a strategic advantage, as studies show that diverse teams drive better business performance, underscoring the impact of investing trends in today’s market.

Upholding human rights and labor standards

ESG-focused businesses are ensuring compliance with international human rights and labor standards across operations and supply chains. This commitment reflects their dedication to ethical practices and aligns with global green finance principles that promote responsible investment.

Ensuring ethical business practices

Companies are committing to ethical practices by implementing strict codes of conduct and zero-tolerance policies for corruption by 2030. Such measures safeguard their reputation and attract investors who prioritize environmental, social, and governance criteria in their decision-making.

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The role of ESG

One of the most immediate advantages of implementing ESG practices is the improvement of brand reputation. As consumers become more aware of the ethical aspects of their purchases, companies that show a genuine commitment to Environmental, Social, and Governance can cultivate more robust and loyal customer relationships.

A solid brand reputation often results in increased sales, enhanced customer loyalty, and a larger market share. For example, Ben & Jerry’s has consistently championed social and environmental issues.

Their campaigns addressing climate change, fair trade, and social justice resonate with consumers, strengthening their brand image and fostering customer loyalty. This dedication has led to impressive sales growth and a devoted customer following.

How ESG profits businesses

Several factors influence the effectiveness of an ESG strategy, highlighting how ESG principles can boost business profitability:

Consumer appeal

Consumers prefer brands that share their values, particularly regarding environmental issues. A 2022 study found that 72% of shoppers consider sustainability vital to their purchasing decisions, with one-quarter willing to pay more for products that support biodiversity and ethical practices.

By prioritizing Environmental, Social, and Governance factors and communicating these goals, companies can grow their customer base and foster loyalty, leading to new revenue streams from eco-friendly products.

Operational expenses

According to McKinsey, ESG initiatives can enhance operating profits by up to 60%. Renewable energy and water conservation investments can lower long-term costs while improving operational efficiency and resilience.

Regulatory compliance

Increasingly stringent ESG regulations require businesses to report emissions and adhere to standards. Proactively aligning with these regulations can help companies future-proof their operations, adapt to market shifts, and access new funding and government support, providing a competitive edge.

In this context, InCorp can significantly enhance your company’s profitability through effective ESG practices by offering tailored ESG advisory services.

We guide you in integrating sustainable strategies that align with stakeholder expectations, enhancing your brand reputation, and attracting environmentally conscious consumers.

Click the button below to convert Environmental, Social, and Governance initiatives into valuable opportunities, increasing your business’s profit and resilience.

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