Published: 16 July 2021 (5 minutes reading)
•Investors are not just focusing on bottom-line or financial data, but becoming conscious about non-tangible assets, “ESG”, which they believe it would create a long-term competitive and eventually reflect on financial performance
•Consumers are demanding more for the company to take social responsibility
•Leading businesses are exerting significant pressure over other businesses to follow their lead on taking a promising step toward sustainable direction
•Government or related regulators also take this issue as their priority through issuing the regulations in both support and penalty ways
Stakeholders are demanding change
Why are stakeholders demanding change? it’s simply because the global climate problem is becoming more serious. The effects of climate change will unavoidably have an impact on a business’s whole supply chain. The main stakeholders which we’re going to discuss about in this article include: investors, consumers, industry peers, and governments. While these people all demand companies to move toward sustainability, they have different reasons behind it.
When investors making an investment decision, the term “ESG” is playing more and more crucial role. ESG stands for environmental, social and governance, widely used as a measure to indicate an organization’s long-term competitive and financial performance advantage. According to an EY survey, “Global Institutional Investor Survey 2018” responses from senior decision-makers at buy-side institutions around the world, 90% of institutional investors would revise investments if companies do not at least reconsider the ESG criteria within their business model.
“The pandemic we’re experiencing now highlights the fragility of the globalized world and the value of sustainable portfolios. We’ve seen sustainable portfolios deliver stronger performance than traditional portfolios during this period”
said Larry Fink, CEO of BlackRock, leading investment corporation
This trend is especially driven by younger generations, which are more connected to the idea that their futures will be significantly influenced by the impacts of climate change. Consumers now demand sustainable products and are willing to rethink their buying habits to incorporate environmental and social product benefits into their buying decisions. Nielsen studies show that 66% of consumers would spend more for a product if it came from a sustainable brand, and 81% of global consumers feel strongly that companies should help improve the environment. This means markets are changing and opening new opportunities for consumer value extraction.
Mainly driven by a clearer understanding of financial impact from sustainable opportunities. Sustainability commitments from large companies have reached a critical mass and now are placing peer pressure on any CEOs that have yet to announce their commitment. Another driver is from the inside out. Employees now seek “purposeful” work. In turn, these leading businesses are exerting significant pressure over other businesses to follow their lead.
Governments and Regulators
So far, corporate interest in sustainable management is being driven primarily by the upside it offers to investors, consumers, and corporations themselves. However, government penalties for not complying with climate regulations already hurt companies across industries. Given what is at stake if further actions are not taken, governments increasingly will bring certain aspects of sustainable management into hard-coded law.
In Thailand, Thailand Sustainability Investment (THSI) is a list of listed companies that operate sustainable businesses with due regard for the environment, society, and corporate governance (ESG), which will be another option for investors who want to invest in a sustainable investment concept that uses ESG factors as a component of their investment decisions along with analyzing the company’s financial data to generate continuous returns in long term. These data are prepared by the Stock Exchange of Thailand. In 2020, there are 124 companies listed on THSI, where SCG has been listed on the list every year.
In conclusion, people are requiring that companies move toward greater sustainability. Stakeholders have various valid reasons to push for this change, based on their own personal circumstances. That is why a company needs to start to consider and take a serious step toward this issue.