Accounting is essential to every aspect, especially financial, of doing business. Whether you are looking to start a new business and trying to effectively figure out payroll, or trying to prepare your business for the next tax season, accounting is crucial in positioning your business for long term success. And with the emergence of ESG (Environmental, Social and Governance) in the last two years, successful Canadian small businesses are including this new social-conscious approach in their accounting in order to thrive.
Savvy Canadian small business owners are realizing ESG is a major opportunity to get an advantage over competitors in their respective industries. So what is ESG? In short, ESG serves as a framework to improve a company’s overall sustainability. Research shows that improving on important ESG metrics such as employee morale, environmental emissions or sustainable business practices positively impacts financial performance in the long term. Now, ESG is rapidly becoming the “new normal” or expectations for doing business. Any serious small business owner will be ahead of the curve in adopting this new paradigm shift in the Canadian and world economies.
Now, you may be wondering, why should I care about ESG? And how does ESG relate to accounting? Without giving away any spoilers, if you take ESG in consideration to run your business, you will not only give your company a head start in transitioning to sustainable business, but it will give you early access to a trillion-dollar industry experiencing exponential growth year over year. In this article, you will find a rundown of Accounting’s role in ESG. This list includes a detailed overview of why ESG is important for your business, how to position yourself to succeed in implementing accounting best practices in a trillion-dollar market, and three key suggestions if you are entirely new to the ESG space. Let’s get started!
WHY ACCOUNTING’S ROLE IN ESG MATTERS FOR YOUR BUSINESS
ESG stands for Environmental, Social Governance. This benchmarking tool evaluates companies and countries on how far advanced they are on sustainability. Many global reporting frameworks now discuss ESG in their annual report. But before we get bogged down in ESG jargon, let’s focus on why accounting practices of the future are integrating sustainability (ESG) into their business structures.
Have you ever heard of BlackRock, Inc? If not, that’s Okay; we won’t shame you for living under a rock for all these years (pun intended). BlackRock is the world’s largest asset manager with US $10 trillion in assets under its management. With the capable leadership of their CEO, Larry Fink, they recently announced that they will be backing climate policies and championing businesses in pursuing initiatives that support the planet, people and profit (triple bottom line). “I could see a world in five years, where ESG meshes in every asset class and everything we do,” BlackRock CEO Larry Fink recently said.
As a new business owner, you may be struggling to figure out how to stand out from the competition or make sense of financial reports. It’s essential to have the proper tools to help account for sustainable metrics and champion causes that are close to the core values of your business. Accounting’s role in ESG is paving the way for SMEs to find their voice and compete with the best of the best. Larger corporations may have access to bigger budgets, but they may miss the mark on creating added value for their customers/community. Goliath is too big to change. Meanwhile, a small business has a much easier time incorporating ESG. The added value of ESG makes brand champions, which is a major reason why consumer buying power is shifting.
One-third (and growing) of current consumers are willing to pay a premium for sustainable products and services. Small businesses should prepare for sustainability to become the rule, not the exception, in the near-future marketplace. By proactively adopting ESG best practices,, you will prepare yourself for business longevity and invested customer buy-in. Having suitable accounting systems in place will aid in making this transition as smooth as possible (skip to how/where to access accounting software and services).
As a business owner in search of accounting practices that will guide you in how to unlock ESG’s revenue-generating potential, look no further than us, industry leaders in accounting software and services, at ReInvestWealth.
3 KEY TAKEAWAYS
ESG reporting and disclosures help companies get access to additional capital. By positioning your company to centre ESG related endeavours, you are strategically setting your business up for a competitive advantage in your field. This competitive advantage unlocks a trillion-dollar (and growing) market, and with the help of a well-versed accounting professional, you will be set up for success.
Strong ESG performance leads to preferential treatment from investors. Is your business looking for additional funding or access to more capital? Is there some chance you would need more money to grow your business in the future? If you answered ‘yes’ to any of these questions, you will want to start taking steps to shift to an ESG perspective. ESG strategies are known to boost business resiliency and help improve overall company performance.
ESG performance will become increasingly critical to attracting and retaining talent. With the ‘great resignation era’ that accompanies the pandemic, business owners know the modern-day struggles of retaining/attracting exceptional talent. Employees are looking for much more out of their work, especially Millennials and Gen Z. With these two demographics (combined) projected to make up 72% of the world’s workforce by 2029, employers want to position themselves accordingly. What better way to do right for the planet, your business and the people in it than by considering ESG strategies for foundational success. It all starts with understanding what this means for your business and its finances, and we at ReInvestWealth help ease the burden.
3 SUGGESTIONS FOR YOU (Read below for next steps)
If you are still on the fence about how to incorporate such ESG-focused accounting best practices into your business, here are three reasons to take action now;
1. With a trillion-dollar industry rising in ESG, you might want to consider how to get a slice of this well sought-after pie. Fortune favours the bold, and only the forward-thinking business owners of tomorrow will reap the rewards.
2. You are looking for a way to increase your social impact and aren’t sure how to incorporate it financially. By ‘solving’ this through ESG, you are allowed to scale your business in unimaginable ways.
3. If not now….Then when?
Contact Us at ReInvestWealth Now To Transition Your Business To ESG Practices
Book a free discovery call with ReInvestWealth now to get access to ESG best practices for your business through an accounting lens.
Are you interested in meshing social impact with financial responsibility for your business? Book a 15-min chat with a ReInvestWealth professional now.
Interested, but unsure how all of this relates to you and your business, not to worry. Schedule a quick video call with us to help explain.
Written by: George Amoh
ReInvestWealth Founder and CEO: Behdad Karimi Dermeni