Companies that do not begin to work on environmental and social issues will cease to be attractive and appealing to the market and other interest groups”.
Pablo Necoechea, Director of ESG at Hogan Lovells.
The service portfolio of the international law firm Hogan Lovells provides advice and support on environmental, social and corporate governance criteria for making more accurate decisions and providing greater value to brands.
According to the expert on the subject Pablo Necoechea, director of ESG (environmental, social and governance) of this firm believes that “companies that do not start working on these issues in environmental and social issues will cease to be attractive and appealing to the market and other interest groups and they will not be able to acquire a resilience capacity by not being able to adapt or be able to generate shared value”, he highlighted in an interview with this newspaper.
Therefore, when organizations have these sustainability practices, they can adapt towards a view of strengths that the market is asking for. For example, in Europe there are already mandatory regulatory frameworks that make the actions of companies transparent, or as in the United States, starting this year, companies are being asked to clarify their environmental and cybersecurity risks, and this will happen in Mexico and Latin America from a best practice to a must be.
“When we are focused on the issue of ESG that is associated with corporate sustainability, we see that more and more companies are adopting these best practices because interest groups such as customers, organization collaborators, the same regulators, government, are more involved demanding social responsibility and sustainability” since according to experts this is a way for the company to take responsibility for its positive and negative impacts.
“It is said that everything that cannot be measured cannot be improved and that is why all companies adopt these issues in order to improve their internal and external performance.” Besides that this can lead to an extra economic benefit.
By following these social responsibility or ESG practices, companies also improve their performance in internal matters and that makes them more demanding because each of these components can bring other businesses, “an example would be that instead of extracting water if it is reused, or treated, water consumption is even cheaper, or for example if the company itself generates its energy and consumes it, it is cheaper than what it consumes from the network” highlighted the firm’s ESG director.
“If the residues are no longer considered as garbage, and are introduced into a value chain, then they will be having economic benefits. In social issues, the greater the organizational development, the more benefits workers have, the better equity practices are carried out; better returns can be had by making their human capital more diverse, and this brings greater productivity for companies that is reflected in better economic returns”.
Future trends
These decisions will be reflected in the discussions of senior management or the boards of directors; but that also implies risks “that companies may fall into a dream washing or social washing. What is really needed is that the actions are defined and avoid a dissonance between what is promised and what is published. Because as it is already happening in the US, there are litigations for ESG issues that were not fulfilled. It is not only a promise of good will, but also of responsibility”, concluded Pablo Necoechea.
