ESG or “environmental, social, governance” has always been with us, but only recently has it developed a name. This is a movement that is gathering steam and it will effect all businesses, just as the technology revolution has affected all businesses. This is not necessary bad and if you embrace it, it may just propel your business to a higher plane. You need an accountant that at least understands what this is all about, and hopefully, give you some pointers. At its very basic, ESG is about stories that you need to tell.I have a client that has been very successful selling high end Italian furniture. Two years ago he dropped all of his successful lines and instead, sourced his furniture from small plants in the former Yugoslavia. When I asked him why, he said that he noticed a gradual shift in his clientele and the new clientele were not interested in brand names. They wanted a story with their furniture that would go something like this: This furniture is made in a small town in the former Yugoslavia by a family that started the factory years ago. Grandpa was an artisan in the furniture business and passed his knowledge on to his son. The son is now passing it on to the grandson. They don’t have a marketing arm and they don’t deal with middleman. The take great pride in making the best quality furniture in the world. I was lucky enough to fine them and import some of their product to this country.My client’s business is now booming. If he had stuck to the old name brand furniture, his sales would probably have decreased over time to a point where he would have eventually been forced to close. This is ESG in action.
You may be surprised to find out how many of your younger staff have embraced ESG. Most of them no longer just want a job, they want a job in a company they feel is helping the community. And I think we all agree that keeping good staff is integral to having a successful business. The advice I give is that when you are talking to your staff, emphasize that the company is trying to better the community, either through selling superior products or services that fit with ESG, or in lieu of that, by some direct contribution to the community such as supporting a youth sports team of a specific charity.The accounting profession is developing new auditing techniques to evaluate firms’ compliance with ESG. At some point in time, you will need an accountant that can reconcile this trend and the implications that go with it. If you business embraces ESG, such an accountant can be of great help to you, provided he he knows what it is all about.The main thing is that the accountant recognizes that there is a major movement under foot that can help businesses. An accountant that is 20 years behind the times probably won’t be much help to you.
