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Advisory

ESG – Risk or opportunity?

Mark Ernots Mark Ernots

In the business world, there is an evolution from ‘sustainability’, in the past often associated with environmental objectives, to the broader concept of ‘ESG’. ESG stands for ‘Environmental, Social and Governance’, and includes items such as energy efficiency, carbon footprint, availability of raw materials in the production cycle, health & safety on the work floor, board remuneration, corporate governance, etc.

We note that these items are becoming increasingly important for businesses and are becoming a crucial factor in the decision-making process of businesses today. This is driven by the reality that customers accept the fact that businesses generate profits, but at the same time demand that this is done while making a positive contribution to society, with respect for its employees as well as the planet.

It is vital for a business to find a balance between on the one hand financial returns, which has been the main focus for decades, and on the other hand ESG driven expectations such as transparent reporting, the environment and social impact. However, evidence is emerging that companies embracing ESG principles become more successful in value creation and risk management.

But what is in it for me and my business? In the next chain of articles, we will dive deeper into specific topics that will affect your business, today or tomorrow. Topics we will discuss include:

  • The impact of ESG-compliance on attracting bank or other types of financing. Can I get better interest rates for investments in sustainable assets?
  • The impact of changing tax legislation in Belgium to move away from fossil fuel to electrified company cars. When should I take action to ensure maximum tax deductibility of my company car expenses?
  • The impact of ESG-compliance on businesses valuations and the value of individual assets. Will I be forced to sell my business at a lower value, or will some of my assets become virtually unsaleable? Can I expect a higher business value if I can demonstrate I am well into sustainability? Will my sustainability efforts effectively ensure long term business value?
  • What is the impact on my cash flow planning? Will I be confronted with an investment CAPEX backlog? Do I need to take into account material non-recurring investments?
  • The impact from a marketing and employer branding perspective. Will customers still like my product or service? What are the expectations of my employees or potential employees? How are they perceiving your ESG journey?
  • The impact of the European Green Deal on sustainable investments in Belgium. Can I obtain grants or subsidies when I invest in sustainable business opportunities?

 

In a future series of articles, we will dive deeper into these specific topics that affect your business today or tomorrow.