ESG Framework

What is ESG?

The ESG framework - Environmental, Social, and Governance, provides a comprehensive approach to evaluating an organisation's commitment to sustainability, ethical practices, and effective governance.

Environmental: Focuses on how organisations manage their impact on the planet, including resource use, carbon emissions, and waste reduction.

Social: Examines how businesses foster diversity, equity, inclusion, and positive relationships with employees, customers, and communities.

Governance: Evaluates leadership practices, transparency, compliance, and decision-making processes.

As ESG compliance becomes essential for doing business with governments and stakeholders, organisations adopting this framework demonstrate accountability, future-readiness, and a commitment to creating long-term value.

The cost of not complying with the ESG framework

Failure to align with ESG frameworks can lead to significant financial, operational, and reputational consequences. As ESG compliance becomes a critical factor for investors, customers, and governments, organisations that neglect these standards risk falling behind in an increasingly competitive landscape.

1. Lost Business Opportunities

Government contracts and partnerships increasingly require strict ESG compliance. Organisations without robust ESG practices are often disqualified from bidding or partnering opportunities.

A 2022 report by PwC revealed that 77% of institutional investors will stop investing in companies that fail to address ESG concerns effectively.

Example: A construction company lost a multimillion-dollar government contract after failing to meet sustainability standards, forcing them to overhaul their operations at a high cost.

2. Regulatory Penalties and Legal Costs

Non-compliance with environmental or social regulations can lead to fines, lawsuits, and legal settlements. These costs are compounded by the reputational damage and operational disruptions caused by litigation.

In 2023, environmental violations cost U.S. corporations over $5 billion in fines and penalties, according to the EPA.

Example: An energy company was fined $100 million for failing to meet carbon emission reduction targets. The incident also triggered shareholder lawsuits, further eroding trust and market value.

3. Loss of Investor Confidence

Investors are prioritising ESG-focused organisations, and those without a clear ESG strategy are increasingly viewed as high-risk. This limits access to funding and raises the cost of capital.

The Global Sustainable Investment Alliance reported that 35% of global assets under management ($35 trillion) are now allocated to ESG-aligned investments.

Example: A tech company saw its stock price drop by 15% when a leading asset manager divested due to its weak ESG policies.

4. Reputational Damage

Consumers are more socially conscious than ever, and companies that fail to address ESG issues face public backlash and brand erosion.

A 2023 Edelman Trust Barometer survey found that 68% of consumers will not purchase from a company that doesn’t demonstrate environmental or social responsibility.

Example: A retail brand faced a boycott after revelations of poor labor practices, leading to a 20% decline in quarterly revenue.

5. Talent Retention and Recruitment Challenges

Today’s workforce seeks employers who reflect their values. Organisations without clear ESG commitments struggle to attract and retain top talent, leading to higher recruitment costs and reduced competitiveness.

According to Deloitte, 49% of Gen Z employees would reject a job offer from a company that fails to address sustainability and social responsibility.

Ignoring ESG compliance isn’t just a risk, it’s a liability. Aligning with ESG principles is an investment in your organization’s future, ensuring resilience, relevance, and growth.