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Monday, May 27, 2024

Why is natural capital important in ESG?

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ESG Ethics have slowly but surely begun to play a more critical role within the decision-making process. With the prevailing global pandemic. Businesses were forced to realign their strategies to not only propel sales and revenue but also introduce. A more positive impact on the world as a whole, outside the corporate landscape.  

ESG or Environmental, Social, Governance are factors businesses now have to consider. In order to reduce the negative impact their activities have on stakeholders; 

  • Environmental factors include minimizing the use of non-renewable resources as well as positively contributing to surrounding ecosystems. This could take the form of paperless offices or introducing sustainable energy practices.  
  • Social factors include the consideration of both internal and external stakeholders. This means instituting rules and regulations to maintain employee safety and job satisfaction while also contributing positively to surrounding communities. 
  • Governance factors include implementing ethical internal practices and maintaining compliance with local and occasionally, international, rules and regulations. Maintaining compliance allows organizations to build healthy relationships with authorities offering benefits and opportunities around business growth and development  

ESG compliant organizations are more likely to draw in investors under the pretext of long-term, sustainable growth. ESG considerations also allow organizations to foresee possible business risks and understand opportunities while minimizing negative repercussions around their activities. While standardizing ESG practices is difficult with regulations varying from country to country. Organizations are able to use natural capital as a method to better understand. How to introduce ESG as an important factor of consideration. 

Natural capital is a physical stock of resources provided by the earth and the environment. This includes air, water, soil, and minerals amongst others. Understanding these resources help not only businesses but society as a whole in understanding.  Where to introduce sustainable practices and how to preserve natural ecosystems. 

These critical environmental factors are often regarded as ecosystem services and include ethical practices. Such as the provision of adequate food, clean water, regulating disease control, encouraging pollination, and even flood management. These services expand natural capital to interests beyond environmental preservation. To include basic well-being and recreational capabilities also facilitated by natural resources.  

Natural capital is a more holistic approach towards the business impact on surrounding environments. In its simplest form, it enables organizations to understand their impact and dependencies. Around natural capital assets while introducing business risks and opportunities. Understanding natural capital also allows businesses to improve their risk assessment formulas to introduce more efficient and effective strategies.  Natural capital as a consideration also involves reviewing environmental impact as well as effects on society and the government. This information can be used to make incremental changes that can be incorporated into the business cycle with ease. The additional evidence generated can be used to push long term behavioural changes encouraging a more considerate and sustainable approach to corporate activities with change facilitated from a grass root level. 

It is common practice for businesses to have incorporated some degree of a sustainability initiative as part of their CSR. These programs often focus on reducing carbon emissions, introducing efficient energy consumption and better waste management skills. As a result, the businesses become attractive not only to investors but also to consumers. Consumer consciousness is a growing consideration of all organizations, creating a better overall image around activities invites new customers and assists with retention.  

Natural capital offers a more practical and measurable approach to incorporating ESG considerations into business processes. While the process may seem intimidating to organizations that have not actively considered their impact on society as a whole, ESG consulting services offer the right professional guidance to ease the transition. ESG advisory services take a practical approach to introducing better practices and customize offerings based on the way a business operates.  

ESG strategies are a non-negotiable part of building a sustainable, long term business and should be a priority for organizations looking to not only make an impact within their industry but also worldwide.  


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