Invoice Bazaar Blog

How is the ESG compliance landscape evolving across the world?

By Invoice Bazaar | May 30, 2022

Environment, Social, and Governance (ESG) compliance has been playing a critical but low-profile and unrecognized role in business and industry for over a decade. But the Covid-19 pandemic and the concurrent paradigm shifts, including conscious consumerism, have lately pushed it to the forefront. Businesses have realized that batting for ESG compliance is not a mere PR exercise to appease consumers, investors, and other stakeholders.

Many studies have confirmed a positive correlation between ESG and the short and long-term performance of the business and industrial units. ESG has become so critical during the last few years that the Wall Street Journal reported in July 2017 that State Street Global Advisors, the index-fund giant, had voted against the re-election of directors in 400 companies because they had failed to include women (social and governance) on their boards.

The direct monetary implications related to ESG compliance are also significant. For instance, Impossible Foods, a company making alternative meat products (environment), claimed in its 2020 Impact Report to have achieved something they had thought ‘impossible’ in its 10-year history. They were able to raise US$1.6 billion, riding on their promise of cutting down methane decay and biomass recovery. It made the market wake up and rethink its priorities. Alternative meat was gaining traction in a predominantly meat-eating culture.

It has become clear that to mobilize funds to grow a company and get votes to stay on its board, and for many such reasons, ESG compliance has already assumed a vital role in the corporate world. Naturally, the world of business has become aware of the importance of maintaining and supporting ESG priorities and compliance. Meanwhile, the difference in stock liquidity that ESG compliance can make is also clearly visible. 

According to the US SIF Foundation, US-domiciled investments using sustainable, responsible impact (SRI) strategies in the American market have already reached US$8.72 trillion. This works out to about one in every six dollars under investment management in the US. Even talent gets drawn to companies with solid ESG values because the latter will boost goodwill, the most powerful but intangible asset that is every brand’s goal.Businesses of any size can adopt ESG compliance and principles. A large company may have a dedicated team working for ESG, but a small company can quickly adopt measures like digital receipts, green packaging, use of renewable energy, waste management, and others. ESG also provides a competitive edge, and MSMEs with ESG-oriented operations, products, and services can carve out a niche for themselves. Meanwhile, the obvious business benefits of ESG compliance will continue to grow in the future, whereas the risks of non-compliance will also increase.