ESG the key to unlock value for small businesses

By implementing environmental, social and governance (ESG) practices, small businesses can build a positive reputation. An ESG focus can lead to additional revenue including cost reductions and attracting a growing customer base that values ethical practices.

"Savings generated from investment in energy productivity can create increases in annual profits of between 2 and 10 per cent.” - Climateworks Centre

Our recent conversations with participants of ANZ’s Business Growth Program included insights into how Australian businesses are integrating ESG into their business models. 

Roderic Rees, Chief Executive Officer of Cairns Adventure Group, encourages his customers to be more conscious of their environmental impact. After a tour has finished customers are provided with information about how they can offset the carbon footprint from their bus tour.

Getting customers involved helps educate patrons and demonstrates Cairns Adventure Group’s environmental considerations. It also helps the business attract like-minded customers who want to play a role in lessening their environmental impact.

Implementing ESG practices can lead to cost savings and increased efficiency for small businesses. For example, recent research commissioned by ANZ and the Energy Efficiency Council (EEC) shows energy efficiency and electrification together can deliver 40 per cent of Australia’s emissions reductions, at relatively low cost. 

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The Australian research organisation Climateworks Centre found “savings generated from investment in energy productivity can create increases in annual profits of between 2 and 10 per cent.^”

A recent report by the Climate Group had similar results, finding an average 7 per cent improvement in energy productivity for businesses that implement energy management systems.

ESG practices are central to the business plan of Foamex, a manufacturer of insulation products for building and construction. Foamex uses a circular economy model to reduce the amount of single use polystyrene waste being sent to landfill in Australia. The company collects packaging waste from goods such as televisions and fridges and processes it into insulation panels.

“Optimising resource usage helps our environment by reducing waste,” says Foamex CEO Justin Kelsey. “We are very focused on recycling and have partnered with like-minded businesses in our supply chain and in doing so have improved margins and helped the end customer save money.”

Mining and offshore supplier, Integrated Industrial Group, is focused on ensuring its business is adopting ESG policies to improve its chances of winning tenders, according to its CEO Rod Cox.

“Investors are increasingly considering ESG factors when making decisions. We know that prioritising ESG practices are more likely to attract investment and secure tenders,” Cox says. “By aligning with ESG principles, small businesses can tap into a growing pool of investors who prioritise sustainability and responsible business practices.”

Still work to do

Despite the efforts of companies like Foamex and Integrated Industrial Group, sustainability is not high on the agendas of many Australian businesses. Only 33 per cent of Australian family businesses put sustainability at the heart of what they do, compared to 55 per cent globally, according to PwC’s 10th Family Business Survey.

Embracing ESG practices can help small businesses attract and retain top talent. Today's workforce, particularly younger generations, seek employers who align with their values of social responsibility.

Demonstrating a commitment to environmental sustainability, social responsibility and strong governance, can create a positive work culture. This can help attract and retain skilled employees and sets them up for the future.

The landscape is evolving within Australia. Small businesses that adopt ESG practices will be better positioned to comply with evolving supply chain requirements, develop new opportunities and mitigate potential risks.

The need for responsible business that overall have a positive impact on the environment, social and governance is not just about large global companies. This responsibility is needed for organisations of all sizes.

At ANZ we seek to assist businesses in developing ESG friendly practices. At the same time helping to meet the expectations of our current and new customers.

Mark Ellul is Head of Community Sustainability at ANZ Institutional and Simon Janes is Portfolio, Data & Credit Appetite Lead at ANZ Commercial

More information about ANZ’s ESG approach and targets can be found in the ESG Supplement and Climate-related Financial Disclosures.