ESG (Environmental, social, and governance) is a set of standards established by the Securities and Exchange Commission (SEC) for measuring a business’ ethical impact on the environment and society.  The SEC requires that all public companies to disclose information important to investors, which as of 2022 includes ESG-related risks.  However, this added requirement has been market led only, as there are no mandatory ESG enforcement mechanisms or required disclosure at the federal level.  Having said that, the SEC is bringing actions against businesses for misleading investors and  the suggestion is that more enforcement tools will be forthcoming.

Is ESG important if you are a small privately held Ohio business (LLC, Corporation, or Cooperative), and not a public company?

Yes.  A savvy Ohio business regardless of size or whether it is privately held, should take these new reporting standards as a sign of a global business trend.  Think of it as your heads up to get good ESG practices in place now. 

Five reasons why to consider ESG Practices in Ohio even if you never plan to go public.

1. Good ESG practices are good for your business.  In a separate forthcoming article featuring City Market grocery store in Vermont , you will learn of some particularly impactful ESG practices that have led to a very successful business.  According to ICAEW, “Businesses that perform strongly across the ESG factors become more resilient to emerging issues and more stable.”  
2. The future of any business is never certain nor is the future of ESG requirements. Requirements are likely coming for all businesses. Being forward thinking and positioned for potential growth is prudent for any company.
3. Establishing good ESG practices may take time.  It is probably the easiest and least expensive to develop solid ESG practices when you first start your business in Ohio.  If you are already in business, then starting as soon as possible to develop these is a good idea as it will take time to make changes.  That relates to the next reason.
4. ESG is less expensive if you plan for it.  Clearly ESG is a trend and being proactive in business tends to be less expensive than reactive.
5. ESG is good for society and the planet.  This reporting is the mechanism that holds businesses accountable for their operations and is the driving force for positive change that aligns to frameworks such as the UN Sustainable Development Goals. Conscientious, inclusive, democratic approaches to governance such as the principles encouraged by the cooperative business model make for satisfied employees and thus more successful businesses.

How do I begin establishing good ESG practices for my Ohio business?

Begin by making it a priority among your management team.  Aim to establish an ESG team or point person, ideally voluntary person(s) who take an interest in ESG values and see the benefit good practices may have to your business.   These folks will be responsible for ESG research specific to your business and conveying those findings.  Communication and buy-in throughout the company are critical.  It will likely be a process especially if the business is trying to put in place new practices. 

Good communication and onboarding practices.  

As a result, a slew of ESG reporting software platforms have emerged to help businesses.  The challenge with ESG reporting is the void of globally recognized standards and frameworks.  ESG framework organizations are working to regulate and standardize frameworks globally, but it is not here yet.

Do I need an ESG reporting strategy?  

Eventually, your business may need an ESG reporting strategy.  Hopefully by then, there will be enforcement mechanisms for SEC requirements and reporting frameworks available with international standards.  For now, think of ESG standards as ways your Ohio business can get in place now sustainable practices that are good for the environment, society, and your business.