What is Your Company's ESG Ratings and Why Do You Want a High Score

company esg rating environmental social governance score business sustainability

In today's society, consumers want to do business with a company they believe in. People are putting their dollars into companies that are transparent. Investors and customers want their money to go to businesses that value the environment and social values.

It's not a small audience either. The market for sustainable goods and products in the US is expected to reach $150 billion by 2021. The value of a company's ESG rating is skyrocketing.

ESG stands for environmental, social, and governance. The three categories refer to a company's actions and policies related to those three things. Businesses that score well in ESG ratings tap into a rapidly growing investment sector valued at $30.7 trillion in 2019.

Do you know what your company's ESG rating is? If you want to succeed in the new decade, your ESG score needs to be as high as possible. Read on to learn what you need to make sure you're raising your rating.


The Value of the Environment

Climate change. Wildfires in Australia. Plastic filling our oceans. Environmental concerns fill the headlines and our news feeds. According to a 2018 Nielsen study, 81 percent of people believe companies should do something to improve the environment. 

With responses like that every company should pay attention to how its investors and consumers view its ESG rating. The value of commissioning an ESG report or using a reporting service is high enough that the cost is well worth it.

The relationship between a company and the environment needs to be demonstrated. Investors and consumers want transparency. They want to know that their dollars are supporting environmental change and health.

One reporting option is the Global Reporting Initiative. The GRI standards are used by 80 percent of Fortune 500 companies. The reports produced by GRI offer the transparency stakeholders want and need.

Spend time on your ESG rating. Companies need to know how the environment and how they interact with the environment can affect their rating.


Why a Social Conscience is Good for Your ESG Rating

It's not just about the environment. A company with a good social conscience will also score well in ESG reporting. 

Social conscience for business involves the relationships that business holds. Donating to charities, investing in local communities, staff that volunteer and employee safety are all part of the factors that make up a good ESG rating. 

As Forbes noted a few years back, 81 percent of Millenials expect businesses to be good citizens as well as produce good products and services. Millennials are the now and future of investing so valuing the same things they do will help businesses thrive.

The media is interested in socially responsible companies. Reporting from the media, as well as ESG reporting agencies, is increasing. Consumers and investors value socially responsible companies so headlines reflect that. 

Many well-known companies have featured in the media because of socially responsible policies. Examples of these companies include TOMS, Zappos, Virgin Atlantic, and Ben & Jerrys. Good media coverage leads to increased exposure and better ESG ratings.

ESG ratings that show a business is committed to its staff's wellbeing, its community, and sector-relevant issues boost the value of that business. Find an ESG consultant that understands the value of social conscience. 


Good Governance is Key 

Intending to make a business adhere to environmentally and socially responsible goals is a good first step. But internal and external governance is key to making that happen. Environmental, Social, and Governance ratings are also important in terms of reporting to stakeholders, customers, and investors.

Companies need to align environmental and social initiatives with criteria that ESG reports value. There are many ESG reporting agencies. Some of the best ESG reporting consultants and agencies in the world include Truvalue Labs, KPMG, and MSCI. 

But not all businesses can afford to use a global ESG consultant or reporting agency. Small businesses, in particular, often find these services too expensive. That's a shame because small businesses are often at the forefront of adopting ESG policies. 

There are cheaper options than big reporting agencies. One example of a more frugal ESG company is is B Lab

Whichever route a company chooses for ESG reporting their ESG ratings it will need internal metrics. Establishing good internal metrics forms the basis of good governance. Those metrics can then be used to tell the company's ESG story to external stakeholders. 

The value of having good governance and useful ESG metrics is that it will increase a company's ESG rating. Those ratings are valuable to savvy investors. The ratings show transparency. A TD Ameritrade survey found that 67 percent of investors are more concerned with a company's social and environmental causes than the rate of return they get on their investment. To get powerful information about ESG ratings, consultants, and reporting, read more here.


Invest in Your ESG Ratings

Investing in your ESG rating and how you report it is like investing in your company. Consumers want a high ESG score and that means investors do too.

If ESG reporting shows a business values social and environmental change investors and consumers will flock to that brand. The report on a business's ESG rating is becoming as valuable as the end-of-quarter sales report. It's a key performance indicator. Don't ignore it.

Find out your ESG score and you'll have a better understanding of how external stakeholders view your company. Once you know how your business scores you'll be able to introduce measures that will see it rise the ESG ratings table.

Remember, ESG factors involve many different indicators. From company culture to employee health and compensation to environmental footprint, ESG ratings impact how we all view a business. 

Investing in an ESG consultant to take your business to the next level and to ensure it is positioned to take advantage of the surge in ESG awareness among consumers is a smart move.