“Amid the heightened attention on social, environmental and corporate governance issues, it has become vital for companies to integrate ESG (Environment, Social and Corporate Governance) into their business strategy with management teams capable of system-based thinking and being committed to invest in long-term initiatives that drive shared-value creation,” according to Mr. Ichiro Hara, Managing Director of ABeam Consulting (Thailand) Ltd., a global consulting company headquartered in Japan that specializes in digital transformation.
Just recently Tesla overtook Toyota in market valuation by $600bn, showing a clear trend towards intangible assets being valued higher than tangible assets. In 2017 according to Strategic Finance, the ratio was 87:13, with ESG being part of that market valuation.
ESG has three criteria used to measure the sustainability and societal impact of an investment by a company or business. Over the past years, there has been a growing body of evidence, that companies with high ESG standards can generate better business performance across a range of metrics including sales growth, return on equity, etc.
Research has also shown that by incorporating ESG in their long-term investment strategies, companies can achieve top-line growth, build a loyal customer base, reduce cost, minimize regulatory and reputation risks, increase employee productivity, as well as optimize investment expenditures. According to the Global Sustainable Investment Review, ESG-oriented investment had risen sharply by 68 percent during 2014 and 2018; indicating an accelerated trend towards ESG.
However, while the ESG proposition is generally understood, the ability to link it to tangible outcomes is often lacking, undermining its full potential. Many companies also find measuring ESG performance challenging due to the lack of reliable systems that can help them collect, quantify, and assess scattered ESG information.
“ESG is an important factor that helps a company achieve long-term value creation. Each factor of ESG is critical to business and should be closely linked with corporate vision, management decisions, strategy and business plans.” said Mr. Hara.
To tackle this, ABeam Consulting has introduced the ‘Digital ESG Management’ platform – a comprehensive suite of digital solutions that will monitor, collect, quantify, analyze and make ESG’s non-financial information become more tangible, measurable and visible to the management team and other stakeholders.
First launched in Japan, the Digital ESG services consist of three key components: ‘Data Connection’ that collects scattered ESG data across the entire operation on a consistent and regular basis, ‘Analytics’ that analyze the correlation between ESG and financial results based on the collected data and articulate cause-and-effect relationships, and a ‘Cockpit’ that presents the quantitative analysis in a visual format to make it easier to access and understand.
“Based on our experience in Japan, the Digital ESG services help incorporate ESG and non-financial information into business performance analysis that enables companies to make better business and investment decisions, enhance transparency in information disclosure and strengthen their stakeholder engagement. In addition, our research shows that an increase of as little as 10% can have a positive impact up to 13.8% in overall corporate value due to improvements in human resources and intellectual capital. Having an effective ESG monitoring and assessment system will also help maintain operational resiliency and safeguard the company’s reputation in the long run,” concluded Mr. Hara