Environmental, Social, And Governance (ESG): Why Does It Matter in the Workplace?

Every move an organisation makes is aimed at improving its bottom line, whether it expands operations, reduces spending, increases production, or even installs a free coffee machine in the pantry. It’s no secret that keeping your people engaged plays a significant part in achieving this. A satisfied workforce means they can give more to their work – which is good news for you. It’s why many companies are focusing on employee experience, from the aforementioned complimentary caffeine to Diversity, Equity, and Inclusion (DEI) policies. What may surprise many employers is how Environmental, Social, and Governance (ESG) also factor into that productive and fulfilling work culture every employee looks for.

ESG refers to standards that measure an organisation’s environmental and social impact. 

• The Environmental factor entails your company’s impact on the planet. It includes its carbon footprint, waste production and management, resource usage, conservation efforts, and environmental sustainability.

• Social includes your company’s relationship and reputation within the community wherein you operate. Your labour practices and DEI policies fall under this factor.

• Governance comprises legal, ethical, and operational systems. It includes management quality, executive compensation, transparency, and shareholder rights.

Singapore has been at the forefront of ESG efforts, especially in Southeast Asia. With ESG built in the Singapore Green Plan 2030, the country has made strides for a national movement on sustainable development. For instance, since 2016, the Singapore Exchange (SX) has required sustainability reporting for its listed companies, encouraging organisations to be open and responsible for their ESG efforts. 

While ESG is more encouraged than enforced on all enterprises, there’s much impetus why businesses, big or small, should start looking into more sustainable practices. Here are 10 reasons to consider going into Environmental, Social, and Governance. 

Who wouldn’t want to be known as a company that practises sustainable initiatives? It builds trust and credibility within your team and improves your reputation to investors, patrons, and other stakeholders.  

A Bain & Company survey reports that \Singaporeans are willing to pay more  to support sustainable brands. Consumers, especially Gen Z, have become more attentive to their decisions' environmental and social impact and prefer greener options when available. 

You can also use your ESG efforts to build your brand further. For example, DBS Bank had the Sparks series to highlight their “live more, bank less” credo. The show, launched in 2016 and spawned three seasons, addressed the perception that banking was a transactional enterprise. It delved into social and environmental issues and highlighted transformative eco-friendly digital solutions. 

A 2022 Accenture survey reveals that 77% of APAC Gen Z and millennials want to work in the green economy. With these groups comprising most of the workforce, you may lose talent to companies with well-defined ESG programmes. You may need to shift your values to align with the needs of talent.

Moreover, having ESG policies ensures that you promote people based on performance and sound judgment rather than favouritism or personal connections. 

Singtel is one company that has invested in ESG to attract and retain talent. It provides existing employees with ample training in green skills, such as digital literacy, converting “traditional” jobs into sustainability roles. It’s a strategy that saves Singtel from hiring expensive and external sustainability specialists and keeps the talent in-house. 

Deloitte reports that Singaporean consumers (60% of Gen Z and 79% of millennials) are willing to pay more for environmentally sustainable products and services. This should give you a glimpse of how ESG practices can boost your financial results.

In fact, there are numerous ways ESG can help with your bottom line, from creating more productive employees to driving innovation – both of which will be discussed later. ESG helps attract investors who may see your company as low-risk and also more supportable in the long term. 

According to McKinsey, most chief investment officers are willing to pay a premium for companies that show a clear link between their ESG efforts and financial performance. Meanwhile, another McKinsey report states that organisations with strong ESG credentials outrun their peers in profitability by 2% total shareholder return.

Keppel Limited, a 55-year-old conglomerate specialising in property, infrastructure, and asset management, began its sustainability promise over a decade ago. It has committed to net-zero emissions by 2050, broke down corporate silos and streamlined operations, and pivoted its business model to sustainable urbanisation. Keppel is also shifting towards renewable energy, aligning with trends while also preparing for a market that’s veering away from fossil fuels. All these efforts have contributed greatly to the corporation's financial performance and its revenue in 2023 improved by 8.02%.

ESG initiatives, such as digital transformation, don’t come cheap. It may entail upheaving entire business processes, such as replacing paperwork with digitised options. It’s why many enterprises who plan to go the ESG route have to think long-term. 

City Developments Limited (CDL), a global real estate operating company, shifted towards a sustainability direction in 1995. One of its initiatives was replacing facilities with energy-efficient alternatives. Another of its pilot ideas was to install energy-saving lifts in selected properties in 1998. It generated 50% savings in energy use. Between 2012 and 2027, CDL’s energy-efficient retrofitting slashed over S$20 million off the electricity bill. 

Beyond green transformations, ESG prompts efficiency. Better, more streamlined processes can eliminate time-consuming tasks and remove redundancies, allowing you to spread your resources around. It prevents waste and enhances productivity.

Risk alleviation may not be an obvious ESG benefit, but it’s another reason many companies are turning to this holistic framework. Organisations that address environmental, social, and governance issues proactively have more chances to avoid potential pitfalls and guarantee stability and resilience. It’s why many investors lean towards ESG companies.

Environmental risk mitigation

• Companies that prepare for environmental sustainability can react better to climate-related disruptions, such as extreme weather events, regulatory changes, and resource scarcity.

• Optimising your company logistics by streamlining your resources or implementing smarter systems can make dealing with supply chain issues easier. For example, proper water management strategies can help you handle droughts and water shortages.

Social risk mitigation

• Organisations that focus on employee well-being, create a safe and secure environment, and promote fair labour practices can reduce the risk of labour disputes, high turnovers, and low employee morale.

• Companies that commit to community development and engagement are less likely to face opposition or boycotts from the local population.

Governance risk mitigation

• When an organisation is rigid about transparency, ethics, and compliance, it will unlikely fall into fraudulent and corrupt practices. A proper governance framework can give you a better leg to stand on when dealing with potential legal issues. It also helps maintain investor confidence.

• A diverse and independent board can keep the company on course to fulfilling its ESG goals and can prevent mismanagement and unethical behaviour.

In short, ESG keeps your company compliant, which allows you to anticipate changes and adapt accordingly.

Remember CDL installing the first energy-saving lifts in the ’90s? A few years later, the company also installed a twin-chute pneumatic refuse collection system that made rubbish segregation simpler. In 2009, it also developed Singapore’s first eco-mall (City Square) as well as Asia’s first CarbonNeutral development. 

ESG initiatives can spur innovation by encouraging the development of sustainable products and services. Companies must eschew conventional practices in favour of new technologies and processes that minimise environmental impact, improve social outcomes, and enhance governance structures.

Another example of need-based innovation is Sky Urban Solutions’ Sky Greens vertical farming platform. It addresses Singapore’s land-scarce problem by constructing an aluminium tower with multiple planting troughs with at least 10 times more yield per unit area than traditional farming. 

The forward-thinking mindset instilled by ESG allows businesses to foresee changes, ensuring they can soldier through changing economic or environmental conditions.   

For example, the agribusiness group Wilmar International has been transitioning to sustainable palm oil practices. Its primary focus is to increase yield and extraction rate, meeting production demands without clearing land. It’s also one of the companies that have committed to achieving net-zero emissions by 2050 and it’s working on making its packaging more recyclable.

A company with positive values that pledges non-discriminatory labour management? What’s not to love? Many people forget the S and the G aspects of ESG, but a massive part of these standards revolve around the workforce. After all, your sustainability strategy should extend to your employees as well. Think about Singtel’s decision to upskill and reskill instead of hiring new talent. 

ESG organisations understand that retaining employees as much as possible is a more efficient approach. It’s why they focus on measures that enhance employees’ physical and mental well-being, from hybrid working setups to childcare facilities to gym memberships. 

With ESG encouraging impartiality in hiring and retaining talent, employees feel much more secure in their future. Moreover, a diverse team can lead to better, more well-rounded solutions that could improve the company overall.  

These days, employees work beyond compensation. They want a sense of purpose in their job, which ESG companies have built-in. When your organisation takes your corporate social responsibility seriously, your people will feel they’re contributing to a larger societal and environmental mission, bolstering their morale. 

CapitaLand not only offers sustainability training to its employees but also engages them through various programmes and activities outside the company walls. CapitaLand Green Committees allow environmentally passionate employees to volunteer for various green initiatives.

Another case is CDL, which formed the Singapore Sustainability Academy. It offers workshops that educate employees on environmental sustainability. 

ESG’s culture of transparency, enforced especially by agencies such as the Monetary Authority of Singapore, the Singapore Exchange (SGX), the Sustainable Singapore Movement, and the Global Reporting Initiative, creates an atmosphere of trust among stakeholders – from investors to employees to suppliers to customers. Your reports signify that your company is responsible, reliable, and considerate.

Returning to an earlier example, Keppel’s dedication to reducing carbon emissions, sustainable urbanisation projects, and corporate social responsibility have fostered stronger ties with all its relationships. Likewise, Singapore Airlines’ implementation of a whistleblowing programme, solutions against conflicts of interest, and anti-corruption training have earned praise and respect within its circles. 

Environmental and social responsibility may not be a competition, but it could pique the interest of other companies. Seeing your improved bottom line, happier employees, and upright brand reputation may make other companies want to copy your secret sauce. 

Apart from competitive dynamics, your ESG actions can impact regulatory pressures, influence the supply chain, change labour practices, and have other societal implications. These are factors that can affect other organisations and the industry as a whole.

While ESG requires heavy commitment, you can begin with baby steps, especially if you’re a smaller enterprise. Here are some ways to drive your organisation to a more sustainable and resilient future. 

Check for readiness and feasibility

Study how your company operates. Pick out the gaps and the areas for improvement. See which ESG policies you can use to improve your situation. Should you transfer to digital processes? Does your team need a better work-life balance? Is your management not diverse enough? You can also compare your systems to the rest of the industry. 

Next, you should also feel the organisation’s mood. Is everyone ready to dive into this commitment? A steadfast ESG policy requires staunch leaders, so yours should understand and prioritise these issues. You may also need to teach your team about sustainability work. Everyone – from the stakeholders to the consumers – must be aligned and aware of your goals. 

Set clear ESG goals

ESG isn’t a platitude or buzzword. You need clear, concrete, measurable goals. Make these objectives after your assessment, which can serve as your baseline. Ensure they match your company’s mission, values, and long-term strategy. You can use the Sustainable Development Goals or Global Reporting Initiative as a guide. You can also create goals based on the SMART (Specific, Measurable, Achievable, Relevant, and Time-Bound) strategy. 

For example, ST Engineering Limited has committed to reducing greenhouse gas emissions and refining its energy efficiency methods. They also want to upskill and reskill 30,000 employees and implement policies to eradicate corruption across operations. It has set a 2030 deadline to accomplish all these goals. 

You need to record and review your progress. You may even update your plans based on economic and environmental shifts. Communicate these goals to all your stakeholders to cultivate accountability and integrate it into your organisational culture. 

Deploy an ESG team

If you’re just starting your ESG journey, designate a team to ensure you remain on course. Remember those youths who are looking for green jobs? Maximise their passion by allowing them to effect change in your organisation.

Adopt DEI policies 

DEI reinforces all three ESG components. Think of it this way: A diverse workforce provides different perspectives and experiences. This variety can show you how environmental and social issues affect many communities. This understanding allows you to be more attuned to your people’s needs, helping you develop better, more customised strategies. 

Moreover, a more diverse leadership team prompts better decision-making processes that could lead to more effective business judgments. 

Surround yourself with an ESG-compliant network

According to a BBC Studios survey, 52% of Singaporean business leaders prefer to engage with higher-cost suppliers so long as they have better ESG credentials. As part of your Governance strategy, make sure to vet and evaluate your suppliers so they’re on the same page as you ethically, socially, and environmentally. 

Here’s an example: in January 2024, Singtel launched its new data centre brand Nxera, which has a four-pronged Memoranda of Understanding, three of which include:

• Collaborating with NVIDIA to make AI adoption more accessible in Singapore and, eventually, APAC

• Tapping Gulf Energy, Medco Power, Sembcorp, and TNB Renewables to push it towards net-zero emissions

• Partnering with other companies to improve power and water efficiency

Engage with the community

Nxera’s fourth and final memorandum entails working with institutes of higher learning to train 150 students annually for eventual employment in the company. Many corporations are doing similar projects, including CDL and global investment firm Temasek Holdings Limited. The results not only create a training ground for citizens but also future-proof the company’s interests. 

Report your progress

Transparency is a crucial ESG practice because it keeps every party committed and liable. After all, you’ll feel more encouraged to do your part if you know you’re being monitored. 

Honest ESG reporting lets stakeholders assess your company’s commitment to these sustainable and ethical practices, ensuring that you’re not greenwashing your metrics for the sake of trend but are genuinely working for positive outcomes. With accurate information, potential investors looking to work with ESG-driven companies can make better decisions.

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ESG practices don’t work in silos. These reasons are all connected. Boosting your brand through ethical policies helps attract investors and talent. Saving on costs from sustainable alternatives gives you better chances of increasing your profits. Mitigating risks through careful governance pulls in stakeholders. Creating an Environmental, Social, and Governance strategy may require you to jump in with both feet, but the benefits are just as holistic.