Sergio Hernandez
President & CEO
CIAL Dun & Bradstreet Mexico
Expert Contributor

ESG: An Evolution of Company DNA

By Sergio Hernández | Tue, 11/22/2022 - 12:00

ESG, or environmental, social, and corporate governance, criteria are now essential terms in the language of business. These terms have caused organizations to boost transparency, regulatory compliance measures and, above all, trust with customers.  

Each company has a unique DNA that distinguishes it; that is, its own identity, corporate essence, and industry-specific structure. Gradually, ESG criteria have been integrated into this DNA, leading into the vision, the mission, and the initiatives of companies.  

Clearly, ESG criteria are not just a trend, as they are already permeating the entire business environment, and are key factors that guarantee the permanence, success, and profitability of an organization. Just one example: from 2020 to 2022, ESG investments have attracted US$4 billion in assets under management worldwide, according to BlackRock. The expectation is that ESG fund assets will grow 275 percent worldwide: from US$8 trillion to US$30 trillion, by 2030. 

Where Does Latin America Stand?

Despite representing 8 percent of global GDP, the region still lags far behind in sustainability, with an incipient 2 percent of total investments. A clear example is Mexico, with close to US$2.7 billion focused on ESG. However, there is a lack of both technological and corporate culture to measure and evaluate companies by these criteria.

What is the reason for this shortfall? One possible reason is the perception that there is no clear link between ESG and performance. Unlike other international markets, where the positive relationship between financial performance and ESG ratings is not contested, in Latin America the validity and effectiveness of these parameters is still in doubt.

However, if companies wish to grow, they must adapt to new global sustainability demands. Today, companies must emphasize ESG to ensure three important points: regulatory necessity, which will help validate compliance processes; access to investment, as investors tend to favor organizations with an ESG vision; and customers, who will ensure a much more profitable future projection.

In this way, ESG-related initiatives will not only provide valuable information that will prove compliance under more rigorous standards but will also ensure the transparency needed to increase interest and participation from more investors, as well as greater access to clients.  

Why Merge ESG Initiatives With Technology?

Technology is a driver for providing ESG-related information and makes it possible for companies to become certified and reinforce their sustainability principles. One of the most outstanding advantages of adopting ESG initiatives with technological support is the ability to extract and analyze data that translates into better decisions for organizations.  

According to a Dun & Bradstreet survey, 66 percent of entrepreneurs agree that the lack of clear information and resources makes it difficult to evaluate current processes that revolve around these guidelines. In addition, 63 percent of participants said that their companies are unable to measure the long-term impact of their objectives. On the other hand, 47 percent said that they do not consider the data from these criteria when they lack the resources to analyze them.

For this reason, the technological factor must be involved in the work processes, strategies, generation, selection and management of business information, as it provides them with cloud-based infrastructure that maintains high security standards for sensitive information, mechanisms that generate confidence in stakeholders. 

In this respect, ESG plays a vital role in the security, credibility and trust of companies, based on how they carry out their processes. If a company incorporates the analysis and improvement of ESG criteria into its DNA, it will manage to increase its profitability, reduce its investment risk, and generate value for itself, which will increase its competitiveness.

Finally, ESG terms are also related to human resources issues, as candidates and employees are increasingly involved and committed to environmental care, the balance between business activity and its impact on society. 

Today, young job seekers are more likely to accept jobs with companies that have ESG initiatives; and 66 percent of 25-34-year-olds would agree to volunteer for the environment if organized by their workplace. 

With this last point, it becomes clear that companies working under ESG guidelines will have a better chance of attracting and retaining the talent of future generations. There is no doubt that the DNA of companies and their organizational culture will be crucial when recruiting the most suitable candidates that will contribute to their development and exposure. Thus, transparency, both internally and externally, will be one of the most crucial factors for the growth of a company in the global landscape. 

To drive this growth, my mission is to provide key and unique information on the ESG initiatives of companies operating in Latin America. Together with my team, we are committed to certify them so they can follow global sustainability principles, adapt to regulatory compliance, ensure customer and investor confidence, and get data that empower them to make the smartest decisions.  

 (In collaboration with Alejandra Espinosa, Sustainability Leader)

Photo by:   Sergio Hernández