Donald Boyd: Address ESG or lose funding
Donald Boyd, head of growth at accountancy firm Azets, is urging businesses to embrace and implement Environmental, Social, and Governance (ESG) policies or risk losing their sources of funding.
Climate change and ESG is already starting to have a significant impact on funding decisions and directors that focus on the short-term could be putting the future of their businesses at risk.
Lenders, suppliers, customers, and employees will increasingly demand a roadmap to a net zero strategy and failure to address ESG policies could affect a business’ viability.
A poll by Azets of 235 SME business leaders has revealed that just 10% of businesses say climate change and ESG will affect their business model with their attention focused on more immediate issues such as staffing (34%), economic recovery (27%), digitisation and technology (19%).
Almost a quarter of SMEs have not reviewed their business model in over a year.
In the midst of a global pandemic, a quarter of businesses having not reviewed their business model is an alarming figure. We would expect more frequent forecasting to make sure businesses are adapting to change, particularly as the real impact of Brexit and Covid-19 may not yet have been felt, and with the growing awareness and importance of sustainability.
A sharper focus on the short-term is perhaps to be expected as SMEs focus on immediate recovery and growth, with ongoing concerns over staffing levels, economic instability, and digitisation an ever-present issue. However, with funding likely to be harder to come by and banks increasingly looking at sustainability and ESG policies as a condition of lending, businesses must be thinking ahead.
Businesses must take more of a proactive approach to ESG as part of regular business model reviews.
ESG will keep growing in significance and will impact decision making by lenders, suppliers, customers, and employees. We urge SME businesses to seek professional advice to ensure they are tackling short-term challenges and planning appropriately for long-term ESG requirements.