ESG performance is difficult to get right

Company performance and ESG emphasis is determined by many factors. These two aspects of a company are often the first thing that most investors and external stakeholders look at when trying to assess a company and set up a profile on them. The importance of overall ESG performance is sometimes overlooked by company managers, which can have detrimental effects on a company’s image to the public and their long-term strategy and goals.

Factors influencing performance

Managers and leaders know that the ESG performance of a company is important yet they often don't understand the way in which it is affected by a company's actions and decisions.

Company ESG performance relies both on internal factors as well as external factors. For instance, within a company, the environment that employees are exposed to and the work culture of a company is vital when it comes to determining productivity and a good working ethic. Further, for customers and third parties to understand a company’s internal operations, good reporting and ESG matters presented in company reports and documents need to be clearly communicated.

Externally, the way a company is viewed in the media and its financial performance is a good indicator of how well it is doing and whether it is reaching the expected ESG emphasis. Factors out of the control of a company are in large a huge driver of ESG performance for all sectors. Factors such as political, economic, social, technological, legal and environmental regulations and decisions can have major effects on how a company’s performance is captured by external parties. While this can be disheartening at times, it also helps companies to strive for better and ensure compliance with any such regulations. While these factors are out of the control of companies, they can use them to mitigate against risks and find ways to capitalise on them to ensure positive performance ensues.

ESG performance management is also a useful way to assess company progress and to get additional information and feedback on a company. Through regular assessments among departments and employees, blindspots and areas of opportunity are highlighted. This enables relevant resources to be employed in these fields to improve a company’s performance and further opens new doors of opportunity.

Stakeholder frustration

Currently, consumers and general society are fed up with the lack of improvement in corporate environmental, social and governance performance. People have realised the importance of these fields and feel that more progress needs to be made in order see the positive change that good ESG performance and progress can have in the business environment. In a report published by Oracle, they found that up to 70% of consumers are willing to cut ties with brands who do not start focusing and prioritising ESG performance and perception within their organisation. This is also influencing work environments, with 69% of employees saying they would leave their current jobs for working environments that focus more on environmental, social and governance issues. If ESG performance is better communicated, companies stand a better chance of attracting business and employees while being able to offer products and services at a premium.

Performance drivers

Historically, companies have based their ESG performance on immediate reactions to change according to a ‘needed’ basis, when in reality performance is more of a long-term, proactive strategy that companies should adopt for continuous improvements. Long-term ESG performance is something that investors and third party stakeholders take into consideration when evaluating a company. Furthermore, performance plans and ESG solutions have traditionally taken more of an opinion-based approach as to how companies adjust their internal organisation and strategy. With markets changing so frequently and the quick reaction time necessary, it is important to make sure a company’s performance is guided by market demands and data rather than subjective internally-decided demands. Having appropriate ESG measures and actions in place has been shown to assist a company in being less risk averse in the long-term. ESG has also become an integral part of a company’s profile, so ensuring they have a good plan in place to meet ESG standards is crucial for performance and success down the line. ESG investing has skyrocketed in recent years, with over $30 trillion in sustainable investments. This is a 65% rise since 2014.

Performance is a way to predict the future of a company based on current functioning and operations within. By measuring and getting regular updates on company performance, you are able to improve efficiency, promote ingenuity and get an understanding of how you are connecting with your clients. Good performance is what all company leaders want, but they don’t all understand the nexus between prioritisation, performance and perception within a company. In order to improve performance there is a lot of behind-the-scenes work that needs to take place.

What matters

At Eunoic, one of our three focus areas is ESG performance improvement. We have identified the correlation between company performance and investor interest as factors that drive company value. Eunoic’s application has a host of features available to users to identify where areas of opportunity present themselves within a company while also being able to identify areas that lack attention. Through the services offered at Eunoic, company managers are able to get a better understanding of the areas that are the most influential when it comes to company performance. We do this through market alignment analyses that take into consideration international best practice frameworks. Through these analyses, managers are able to determine whether their company is under- or over-performing in certain aspects relative to the market benchmark.

While improving company performance is a primary focus of Eunoic’s application, we have also seen the value of benchmarking a company relative to its peers and the market. This allows us to provide you with even more knowledge and insightful guidance on how to improve your ESG performance.

How you're doing

To identify where performance improvement is necessary, we have compiled a series of questionnaires that look at a company from various different aspects. These are intended for internal completion to see how your employees perceive your company’s performance. You are able to view historical data relative to current data to see if there has been improvement in the different sectors. These provide great value to managers and the C-suite when identifying and setting goals for the next business cycle.

What you can do

To compliment the internal self-assessments, we have also got action plans that set out actionable ways to improve company performance and perception for each of the market sectors that are identified as being important from an ESG aspect. Along with actionable tasks, we list metrics that companies can monitor to gauge whether they are improving their performance.

A company’s ESG performance is affected both by multiple aspects as well as how it is being perceived as such. Eunoic provides AI-enabled solutions to help in both ways. Using Eunoic’s applications, a company can diagnose potential ESG issues - both in performance and perception - and get clear and actionable ways to improve.

How we can help

At Eunoic, we believe in a combined approach to improve ESG performance and perception for long-term company benefit. This is why we have made sure to take a holistic approach to solving these problems that companies face as technology becomes a driving force in the corporate world. We know that overall company improvement is best possible through addressing priorities, performance and perception and using technology in an appropriate manner. Through our application, we provide easy and manageable ways to initiate change and see success.

With increasing expectations from investors, consumers, employees and other key stakeholders, sustainability is too important to get wrong. If you would like a free demonstration of our application, including sustainability report review, and news or social media sentiment analysis, please contact us for a free consultation.