ESG: corporate values that serve the common good

ESG: corporate values that serve the common good

When corporate decisions are embedded in values, financial objectives can still meet the common good

In a post-pandemic recovery threatened by the disruptions of the Russian war in Ukraine, our economic operators need to accelerate their efforts to ensure the long-term competitiveness of their enterprises.

This was my main message during an ESG conference organised by the Malta Chamber. An event which once again highlighted how the collaboration between a business-friendly government and ethics-driven industries can effectively enable the transition towards greener business models. An indispensable element that will shape the future of the Maltese economy.

Our corporate mindset needs to be consistently anchored around the creation of better value in everything we produce, in every service or product we propose to our domestic and international customers. This drive for higher added value will improve our competitiveness as an agile economy in the wider European and global context.

It is very positive to see that the pandemic itself accelerated the global consumer attention to the broader impact of companies on the environment and on the social development of the communities in which they operate. This is being coupled by our national ambition to achieve a climate neutral economy in the next three decades. This will not happen on its own steam. Yet the cost of doing nothing will be much heftier than the investment needed to guarantee a viable financial future for our enterprises.

Our policy is to incentivise and provide tangible support for Maltese companies to invest in their own competitiveness. To embrace the notion that long-term value and growth can actually be achieved through environment-friendly investments and a genuine commitment to the quality of life of workers and citizens underpinned by solid corporate governance.

This is what ESG is all about – investing in the future of our companies to ensure that they can do well for their shareholders whilst doing good for the broader community.

I am indeed encouraged to see that more Maltese executives, business leaders and investors are realising that a genuine commitment to values such as environmental protection, the social progress and corporate governance can translate into monetary value via improved competitiveness and sustainable growth for their companies.

This is happening in practise as ESG committed companies are able to attract a virtually untapped market of consumers and other businesses which are becoming ever more sensitive to their impact on climate neutrality. Furthermore cost reductions through clean energy projects and other green projects have a direct positive impact on profitability.

These companies are also seen positively by banks and financial intermediaries which are seeking to diversify their loan and investment portfolios into such companies as they get in line with ESG-related financial regulation.

On top of all this, companies which embed such social and governance practices in their decision making are registering an uplift in productivity through a stronger employee retention rate and a higher level of employee commitment.

This is indeed already happening in our own business community: those companies that provided the best returns to their shareholders in the last three years generated a third less carbon emissions compared to a cohort of some of the largest Maltese companies. These companies also managed to cut by half their water consumption and generate 80% less waste compared to their peers.

These businesses are returning better returns to their shareholders as they invest in their workforce through upskilling and fairer opportunities for all. Compared to a national gender-pay gap of 10%, companies with better financial results have an average pay differential of just 2% between their male and female workforce. This is also reflected by a better representation of women in the management positions, which for these companies stands at 37% – 3% higher than the European average and almost 10% higher than other Maltese companies which participated in the first phase of our ESG initiative.

When corporate decisions are embedded in values, financial objectives can still meet the common good. Targeting prosperity through environmental and socially conscious business models is the model of the future, and this is the direction we will continue taking.