Small Business And ESG

Small businesses that ignore ESG as a passing phase do so at their own peril. In the next few decades there will be a massive transfer of wealth to the millennial generation. This is purported to be the largest in history, surpassing even the inheritance of the Boomer generation.

The influence of the former is already roiling the investment market, because their criteria for placement of funds is vastly different from that of their parents. Boomers have disassociated virtuous activity, such as donations to charities or voluntary community work, from investment of their money. The millennials, on the other hand, tend to connect the two closely. They are bypassing the old polluting and sin industries like coal and oil and embracing cleaner renewables. This not only influences their own actions but also that of their parents, who ask them for advice.

This amounts to one of those tectonic shifts in the market place that small business needs to pay much more attention to. The value of the products and services that are produced are already much more subjected to ESG criteria environmental, social, and governance impact. Both short and long-term business planning must take into account the changing values of this new cohort of investors and entrepreneurs.

The ESG and SRI connection  socially responsible investment is implicitly connected to ESG. The new generation shows every sign of elevating this to a priority for their investment decisions, and purchasing intentions. This applies not only to large investment vehicles such as private equity funds, which sell shares to the public on the stock market, but also to small business funding and start-ups. Many banks are now requesting a sustainability assessment from both large and small businesses.

Small businesses can boost SRI – The company website and newsletter is a good starting point to show that your business follows a socially responsible path. This can be manifested through a commitment to a more eco- friendly supply chain for products and services produced by your company. If you import some of your parts, it is important to know that your foreign suppliers treat their workers well and respect the environment. It is not enough just to pay lip service to this, because in this internet connected world, information is just a click away. Activists investigate corporate claims and call out laggards.

Millennials are more demanding- They are twice as likely than the average consumer to check the impact of packaging on the environment, and to verify the social credibility of companies from which they purchase goods. Switching to biodegradable packaging, and acknowledging ecological and social concerns is not expensive, and must become part of the small business mindset.

The ESG trend is here to stay – When very large money management funds start paying attention to a new trend, and changing their investment philosophy, no company small or large can close their eyes to the impact that it will have on their business. The reality of climate change has its deniers, but the millennials are not fooled and have jumped on the bandwagon of sustainable development.

The virtuous business leader is in favour -Social responsibility is connected to business ethics. The consumers in advanced countries demand a different approach to the way business is done. The exploitation of the environment at any cost is no longer tolerated. Climate change dynamics, supported by a more activist generation, will force business owners to shift to a more ethical approach. The sooner this is realized by business leaders in different industries the better will be their chances of survival in the long-term.

Social media will play an important role The millenials are masters of social media, and will use their networks to promote the ESG concept. This has the potential to attain a critical mass that will sway people all over the world. The effects are already visible in the way that the Chinese government has committed itself to non-polluting sources of power. The vast inherited wealth of the new generation will support SRI with hard cash.