The quest for sustainability is increasingly on the agenda, and it's not just citizens and governments who have to worry about this dimension. Companies, because of their impact on society and the environment, are spearheading this quest for corporate sustainability that mitigates the environmental and social risks of their operations.

This is contemplated in one of the 17 goals of the so-called UN Global Development AgendaBut why is sustainability sewn into the business environment and how can you implement strategies that put your business on the road to corporate social responsibility?

This is what we're going to try to uncover over the next few lines.

What does "ESG" mean and why should your company care about it?

The search for sustainability and the implementation of social responsibility practices in companies, as advocated by the UN, are included in ESG risk management, which stands for "Environmental, Social, and Governance".

But what is the ESG really about?

As we have already mentioned, it is part of the UN Agenda 2030The ESG not only stipulates sustainability and social responsibility objectives that companies must achieve by 2030, but also practices and criteria for evaluating the performance of these organisations within the European framework of sustainable finance.

In practice, each pillar of an ESG strategy for companies includes:

• Environment: implementing environmental and waste management systems, opting for more environmentally friendly materials, reducing emissions of polluting gases and energy consumption, promoting the circular economy and reusing materials, among other objectives;
• Social: equal pay and gender equality, the promotion of diversity in the workforce, links with the surrounding community, the inclusion of occupational health and safety systems, the qualification and retraining of workers and the inclusion of measures to reconcile professional and personal life, among others;
• Governance: This includes, among other things, transparency and legal compliance measures, codes of ethics and conduct, anti-corruption policies, salary policies, responsible purchasing and risk management.

More than just a letter of intent, failure to implement these ESG practices in your business could have a negative impact on your operations, not least because you will no longer be able to access the funding offered by European Union programmes and the Portuguese state, which could have very real implications for your company's resilience in the market.

Another consequence is your company's image among consumers, who, in the 21st century, are increasingly demanding about what they buy and, above all, who they buy from, and are therefore opting for companies that care about promoting sustainability and protecting workers' rights.

In addition to these two areas, non-compliance with ESG practices can lead to serious legal consequences, including lengthy and costly legal proceedings that affect the reputation of your business.

How can you implement ESG risk management in your business strategy?

Avoiding the harmful consequences of not implementing ESG strategies in your business may not be a simple task, but it will guarantee you better environmental practices, lower operating costs and a greater ability to attract investors and customers.

Therefore, in order to implement an ESG risk management strategy in your business, you must:

Step 1: Assess your company's situation

Start with evaluate ESG strategies already implemented and then identify areas with potential for improvement.

A ESG tool Quant can support this process by providing a quick, free and objective diagnosis of your company's performance in each pillar.

Based on this assessment, it is possible to identify not only the most relevant risks for the business, but also concrete opportunities to increase efficiency, strengthen reputation with clients and investors and align internal practices with recognised sustainability standards.

Involving all departments from an early stage, as well as suppliers, clients and the community, makes the process more participatory and ensures that the results of ESG Quant are translated into practical and impactful actions.

Step 2: Define a strategy and the objectives to be achieved

In addition to clear objectives, aligned with the company's strategy and, above all, measurable, it is important to determine the areas of your business where ESG implementation can have the greatest impact, taking into account the risks and opportunities for improvement.

Step 3: Implementation

ESG implementation, always in line with the company's culture and objectives, must become an integral part of the business culture.

To this end, promote the training of your employees on the importance of ESG risk management practices and encourage their participation in the discussion, adapt contracting processes to the new guidelines and make your suppliers aware of the new strategies you will be adopting.

Step 4: Monitoring

Implement mechanisms to monitor the progress of the implementation of ESG practices that are intuitive and guarantee the transparency of the whole process by producing and publishing periodic reports that quantify the progress made and qualify the practices so that it is easy to analyse the positive and negative impacts of the actions.

Step 5: Feedback and continuous improvement

The feedback obtained from reports, employees, customers, suppliers and the surrounding community should serve as a stimulus for continuous improvement in the ESG strategies implemented.

How to measure and mitigate environmental, social and governance risks

The ESG practices that your company will or will not adopt will, as we have already emphasised, be monitored, but how?

In addition to the metrics stipulated internally, such as KPIs (Key Performance Indicators: sales volume, payments received, origin of customers, etc.), it is important to define corporate governance strategies that mitigate risks such as, among others, reducing greenhouse gas emissions, the incorporation of payment solutions in line with customer needs or a policy of equal pay for equal work between the sexes.

In terms of monitoring and mitigating risks, it is also important to pay particular attention to the international ESG standards defined by organisations such as the GRI (Global Reporting Initiative) or the SASB (Sustainability Accounting Standards Board) in order to better define and report the results achieved.

Examples of successful ESG practices in companies

Fortunately, the UN's guidelines on ESG practices in companies have been well received by the Portuguese business community.

One of the examples of good ESG practices is Delta Cafés' involvement with the Campo Maior community.

Through hiring programmes that favour the local workforce and social intervention initiatives through sport and culture, this business group has created a true symbiosis in the Alentejo between the company's economic objectives and the sustainability of the region's social fabric.

The Nabeiro company is not the only one to follow this ESG route.

Sociedade Ponto Verde, which is responsible for the ecopoints in Portugal, has followed a strategy of valorising and reusing the waste collected, giving it a new life and thus promoting a circular economy and greater environmental awareness.

Finally, a word for the Bank of Portugal and companies such as REDUNIQ, which, in order to reduce operating costs, promote the digitalisation of management processes and build a better relationship between companies and their customers (leading to a more personalised shopping experience), actively promote the integration of online payment methods in everyday business, helping them to become more resilient.

Integrating ESG risk management is no longer an option but a requirement for companies that want to prosper in a responsible and lasting way. By aligning environmental, social and governance practices, your business gains resilience, reduces risks and strengthens trust with clients and investors.

Assess your company's sustainability with the ESG Quant tool, obtaining a quick, free and personalised diagnosis, and take the next step towards a more sustainable future.