The ESG imperative: Business trends among European companies
The ESG imperative: Business trends among European companies
The shift to sustainability has become a must for companies around the world. As environmental and social concerns grow, companies must adapt their strategies and operations to meet the changing expectations of consumers, investors and regulators. However, the path to sustainability is not always easy and companies face various challenges and obstacles.
According to a recent survey of 150 companies by BDO Belgium and Mercuri Urval, the main challenges hindering the transition to sustainability are cost and lack of resources (26% of respondents), followed by complex supply chains, cultural and behavioral barriers, and lack of understanding and understanding.
Fortunately, these challenges are not insurmountable. Here are some lessons from our experience that can help businesses overcome them to become more sustainable.
1) Prioritize by putting the essentials first
Our experience shows that the challenge of high costs and lack of resources can often be overcome by developing a clear strategy.
How can you achieve this? What should you consider?
First, determine your priorities. This can be done by carrying out a dual materiality assessment based on two perspectives: the company's impact on people and the environment (impact significance) and the financial impact of ESG (environmental, social and governance) issues on the company's operations (financial significance).
Next, consider the business case when defining the VSP action plan. Although initial investment may be required, sustainability measures can actually reduce costs in the long run. For example, investing in solar panels may require an upfront investment, but can result in significant cost savings in the long run. Therefore, the most important element of cost reduction is a long-term strategy based on the right priorities. Double materiality assessment can help you choose the right actions, determine where to invest and take a long-term perspective.
“By prioritizing dual materiality, companies can better understand the risks and opportunities of VSPs relevant to their business and develop strategies that create long-term value for all stakeholders. This approach can help companies identify and manage sustainability risks and opportunities that are often overlooked."
Vita Liberte
BDO Latvia partner
“Many companies mistakenly believe that cost and lack of resources are the biggest obstacles to sustainability. However, in the long run, sustainability measures often actually reduce costs and increase the position of companies. Sustainability helps companies take advantage of new business opportunities. By prioritizing integrated thinking and comprehensive dual materiality assessment, companies can identify the right areas to invest in and see sustainability as a long-term strategy rather than a short-term burden."
Raivis Jānis Jaunkalns
Head of the audit department of BDO Latvia
2) Involve your value chain
In recent years, globalization has led to the increasing complexity of value chains. While this model has helped improve efficiency and reduce costs, it has also created significant barriers for companies looking to move to more sustainable practices. The complex nature of global value chains means that companies can be vulnerable to supply chain disruptions such as those experienced during the Covid-19 crisis. In addition, companies often have limited visibility into the practices of their suppliers, which can make it difficult to meet environmental and social standards throughout the chain.
How can you achieve this? What should you consider?
Mapping your value chain from raw materials to end users. This can help identify potential risks and vulnerabilities, such as areas where environmental or social standards are not met.
Engaging with stakeholders across the chain (including suppliers, customers, affected local communities, etc.) can help you better understand your company's impact and identify areas for improvement.
Implementation of responsible procurement practices. Set environmental, social and governance (ESG) standards to guide your procurement decisions and support your suppliers to meet these expectations. For example, companies can provide training and resources to help suppliers improve their sustainability practices and/or offer incentives to meet sustainability goals. Read more here.
3) Breaking cultural barriers
Integrating CSR considerations into business decision-making will require a significant cultural shift for many companies. While factors such as cost, quality and time have traditionally been the main focus of business decision making, it is becoming increasingly important to add VSP considerations to this list. However, achieving this change will require a concerted effort to change the attitudes and perspectives of employees and management.
How can you achieve this? What should you consider?
Lead by example: To create a culture that values CSR considerations, it is important that senior management and leadership teams lead by example. This means integrating VSP considerations into your plans
How can you achieve this? What should you consider?
Organize training sessions for your employees and management team. In doing so, always relate the general themes of the VSP to the key aspects of your business and the potential for value creation.
The topic of Diversity, Equity and Inclusion (D&E&I) is a great example to show the importance of education. Many people think that diversity, equality and inclusion is only about not discriminating against women. However, it is much more than that. This includes unconscious bias, the ability to retain talent, complementarity of profiles and ambitions, and more. By educating employees on these topics, companies can overcome these barriers and move toward sustainability.
Overcome your challenges today
By prioritizing the right things, engaging their value chain, improving everyone's skills and breaking down cultural barriers, companies can overcome challenges and make significant progress towards sustainability. The road may be bumpy, but with the right mindset and leadership, a sustainable future is achievable. Contact us today to find out how we can help you move forward on your sustainability journey.
Full report available here
According to a recent survey of 150 companies by BDO Belgium and Mercuri Urval, the main challenges hindering the transition to sustainability are cost and lack of resources (26% of respondents), followed by complex supply chains, cultural and behavioral barriers, and lack of understanding and understanding.
Fortunately, these challenges are not insurmountable. Here are some lessons from our experience that can help businesses overcome them to become more sustainable.
1) Prioritize by putting the essentials first
Our experience shows that the challenge of high costs and lack of resources can often be overcome by developing a clear strategy.
How can you achieve this? What should you consider?
First, determine your priorities. This can be done by carrying out a dual materiality assessment based on two perspectives: the company's impact on people and the environment (impact significance) and the financial impact of ESG (environmental, social and governance) issues on the company's operations (financial significance).
Next, consider the business case when defining the VSP action plan. Although initial investment may be required, sustainability measures can actually reduce costs in the long run. For example, investing in solar panels may require an upfront investment, but can result in significant cost savings in the long run. Therefore, the most important element of cost reduction is a long-term strategy based on the right priorities. Double materiality assessment can help you choose the right actions, determine where to invest and take a long-term perspective.
“By prioritizing dual materiality, companies can better understand the risks and opportunities of VSPs relevant to their business and develop strategies that create long-term value for all stakeholders. This approach can help companies identify and manage sustainability risks and opportunities that are often overlooked."
Vita Liberte
BDO Latvia partner
“Many companies mistakenly believe that cost and lack of resources are the biggest obstacles to sustainability. However, in the long run, sustainability measures often actually reduce costs and increase the position of companies. Sustainability helps companies take advantage of new business opportunities. By prioritizing integrated thinking and comprehensive dual materiality assessment, companies can identify the right areas to invest in and see sustainability as a long-term strategy rather than a short-term burden."
Raivis Jānis Jaunkalns
Head of the audit department of BDO Latvia
2) Involve your value chain
In recent years, globalization has led to the increasing complexity of value chains. While this model has helped improve efficiency and reduce costs, it has also created significant barriers for companies looking to move to more sustainable practices. The complex nature of global value chains means that companies can be vulnerable to supply chain disruptions such as those experienced during the Covid-19 crisis. In addition, companies often have limited visibility into the practices of their suppliers, which can make it difficult to meet environmental and social standards throughout the chain.
How can you achieve this? What should you consider?
Mapping your value chain from raw materials to end users. This can help identify potential risks and vulnerabilities, such as areas where environmental or social standards are not met.
Engaging with stakeholders across the chain (including suppliers, customers, affected local communities, etc.) can help you better understand your company's impact and identify areas for improvement.
Implementation of responsible procurement practices. Set environmental, social and governance (ESG) standards to guide your procurement decisions and support your suppliers to meet these expectations. For example, companies can provide training and resources to help suppliers improve their sustainability practices and/or offer incentives to meet sustainability goals. Read more here.
3) Breaking cultural barriers
Integrating CSR considerations into business decision-making will require a significant cultural shift for many companies. While factors such as cost, quality and time have traditionally been the main focus of business decision making, it is becoming increasingly important to add VSP considerations to this list. However, achieving this change will require a concerted effort to change the attitudes and perspectives of employees and management.
How can you achieve this? What should you consider?
Lead by example: To create a culture that values CSR considerations, it is important that senior management and leadership teams lead by example. This means integrating VSP considerations into your plans
How can you achieve this? What should you consider?
Organize training sessions for your employees and management team. In doing so, always relate the general themes of the VSP to the key aspects of your business and the potential for value creation.
The topic of Diversity, Equity and Inclusion (D&E&I) is a great example to show the importance of education. Many people think that diversity, equality and inclusion is only about not discriminating against women. However, it is much more than that. This includes unconscious bias, the ability to retain talent, complementarity of profiles and ambitions, and more. By educating employees on these topics, companies can overcome these barriers and move toward sustainability.
Overcome your challenges today
By prioritizing the right things, engaging their value chain, improving everyone's skills and breaking down cultural barriers, companies can overcome challenges and make significant progress towards sustainability. The road may be bumpy, but with the right mindset and leadership, a sustainable future is achievable. Contact us today to find out how we can help you move forward on your sustainability journey.
Full report available here