That last meeting was interesting. One of Jean’s senior staff presented a plan to tighten the company’s security posture and improve data privacy. There are so many issues to consider!
And along with data privacy, she wanted to understand the environmental and social impact of the data warehouse her company was using on the small community where it was based. Was the server farm operating efficiently and being a good neighbor?
Business owners often find it difficult to recognize when it’s time to prepare the company for transfer. It’s best to start the process with an examination of the six value drivers of any company.
Jean was working on improving her Strategic, Organizational, Customer, Employee and Financial value. Now it was time to look at her company’s Environmental, Social, and Governance (ESG) Value.
What Is ESG Value?
ESG Value encompasses several different areas of importance.
There are environmental factors considered material to a company’s value. These include natural resource management, preventing pollution of the air and water as well as water conservation, energy efficiency and reducing emissions. Regulatory compliance and environment safety are also important.
Social factors include human rights and the welfare of workers, product development, data privacy and community impact. Also included are fair wage considerations.
Overall corporate governance is very important. Good governance is demonstrated when the company can manage the conflict of interests between the internal and external stakeholders well. Board independence, separate senior roles and executive compensation are part of the consideration.
Why Is ESG Value Important?
Within a small organization, it is not uncommon to find a little time spent on developing a comprehensive data privacy or community impact statement. In addition, many consumers consider the company’s impact on the environment when considering where to purchase goods and services.
It’s important that your company is seen to have strong social responsibility policies, which in turn enhance your reputation and brand image in the marketplace.
Jean knew that her company had clear standards of conduct for its employees. And she also had assigned a staff member to outline objectives related to social factors in her industry. Jean was keenly aware that her company needed to pay more attention to promoting using public transportation to do their part in reducing congestion and smog.
How Is ESG Value Calculated?
To gauge ESG value, buyers are interested in companies with strong sense of social responsibility to its employees and community.
Your company’s score is higher if:
Improving ESG Value
Improve this value driver by working with your management team.
If your company doesn’t have a policy or objectives in writing around social and environmental policy, it’s time to begin.
Document your intent for company governance
Your company is worth more if there are clear guidelines regarding board independence and the separation of senior roles within the organization. If you company hasn’t established guidance on the compensation for the CEO and other senior executives, that documentation may increase the value of your company.
Develop a community mind-set
Companies that are respected and active in their community are considered more valuable. If your organization has the opportunity to reduce its impact on the environment, create and document that plan and begin to implement it.
Get An Exact Roadmap
Jean is continuing her journey to determine the value of her business. A great option for her is Forward Insights™. This evaluation gives her the data she needs to improve the value of her company through an Action Plan that includes increasing ESG value.
Is your company on the leading edge of environmental and social awareness?
If so, the Action Plan provided through Forward Insights™ gives you the path to greater ESG Value and a business that is worth much more.
If your company is a leader in ESG Value for your industry, check out your strengths within the remaining Value Drivers with Forward Insights™.
Don’t forget to read Part 1 of this series: Part 1 of the Ultimate Guide to the Value of Your Business: Strategic Value. Part 2 and Part 3 of the series are also available: Part 2 – Ultimate Guide Of How To Value Your Company: Organizational Value., Part 3 – The Ultimate Guide to the Value of Your Business: Employee Value, Part 4 – The Ultimate Guide of How to Value Your Company: Customer Value, and Part 5 – The Ultimate Guide of How to Value Your Company: Financial Value.