ESG is more than just a buzz word for brand-conscious companies. An abbreviation of ‘Environmental, Social and Governance’, it represents a catch-all for ethical practices, sustainability and responsible behaviour in business – elements of business conduct that are now more highly regarded than ever.
On the environmental front, businesses (and their customers) are becoming increasingly concerned with sustainability, eco-friendly practices and reducing carbon footprints through using renewable energy sources and more environmentally sound manufacturing techniques.
For the social side, issues like inclusion, diversity, responsible labour practices and community engagement are increasingly being pushed to the forefront, with stakeholders of all kinds keen to see operators taking a more responsible approach. Aside from the ethics of this type of business, it’s also a matter of reputational protection – there’s even some evidence to suggest a better quality of business outcome when adhering to these principles of social responsibility.
For governance, transparency and accountability at all levels of leadership, as well as sensible approaches to risk management and building stakeholder trust are ways companies across all industries are looking to boost their credentials. Investors, customers and partners want to know companies are being well run, and that corruption and foul play are not likely to create problems or any potential down-stream impacts at a later date.
All types of businesses need to consider ESG initiatives to comply with business standards, and to establish and build on their reputations amongst stakeholders and partners. For some sectors, this is even more important in pushing back against ongoing misconceptions about how they operate and what they do.
A Practical Example: ESG in the Gambling Industry
The legal gambling industry is a multi-billion dollar sector, with huge corporate operators spanning multiple different countries and markets. Yet still, many misconceptions and problematic views persist, causing the industry reputational problems. This can harm relations with regulators, customers and commercial partners, leading to real-world practical problems for businesses in this sector. This is one example of where ESG policies can make a tangible difference to perceptions, with a positive impact on bottom lines. So how can gambling operators, online and offline, take ESG seriously to counteract some of these problems?
Terms and conditions are a big thing in online gambling, and many players have felt aggrieved in years gone by due to policies that restrict bonuses and withdrawals in what are perceived to be unfair ways.
Things like wagering requirements, which require players to spend a high multiple of any amount they deposit to qualify for apparently free bonuses are being seen as increasingly unfair and borderline unethical, and companies are now more than ever looking to roll back on these complex layers of T&Cs to present a fairer front to their customers. From a customer perspective, it’s still recommended to turn to third party review sites online, whether it’s to have no wagering bingo explained, or to provide information on the other hidden terms and conditions to be aware of when interacting with online gambling sites.
With greater transparency, alongside greater regulatory pressure, conditions are changing for customers and operators alike. In this sense, steps towards developing ESG policies are making the gambling industry fairer for players, and counteracting some of the reputational problems that still persist around the sector.
Challenges for Businesses Promoting ESG
ESG is not without its challenges. Companies often run into difficulties around data collection, privacy, reporting standards, and stakeholder buy-in. In some sectors, stakeholders generally take a less proactive approach to ESG measures. Winning that buy-in, particularly from shareholders, can take time and energy, and it’s incumbent on business leaders to secure that support.
The approach to ESG needs to be standardised for proper monitoring and reporting, ideally in line with the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB). Similarly, the Financial Reporting Council (FRC) is an independent regulator, with its own standard terms and initiatives. Tying in with these organisations and their standards carries its own compliance obligations, and businesses will need to take steps on the process side to develop their reporting and recording mechanisms and identify appropriate metrics. This in practice means some upfront labour and cost – but with ESG gaining ground amongst all stakeholders and customers in terms of significance and importance, this should ultimately pay back over the longer term.
ESG initiatives increase the stability of companies, and make it more attractive for investors to support their mission. Alongside positive benefits to brand reputation, increased savings due to improved efficiency, better regulatory compliance and a reduction in legal issues and fines, investment in ESG makes commercial sense for many businesses.
Ultimately, perhaps the most important benefit lies in doing the right thing, and in making the broader community and wider world a safer, more trustworthy place to be. By integrating these types of policies over time, companies are able to do more social good than ever, while still remaining profitable and efficient.