Why choose ESG: five reasons to invest

ESG is an investment, not a cost. Why should your company take them into account? Here are five reasons that pay off.

Now more than ever, environmental, social, and governance (ESG) criteria and concerns are an integral part of business language around the world. They are also an essential element of management and financing strategies.

1. Benefit from a measurable competitive advantage

The statistics speak for themselves. According to a meta-analysis from NYU Stern School of Business involving more than 1,000 empirical studies, researchers found a positive relationship between ESG and financial performance in 59% of the studies.

Be prepared for calls for tenders

For Québec SMEs, one of the benefits of ESG investment is preferred access to calls for tenders. Several public contractors such as Hydro-Québec and municipalities now consider ESG criteria in their selection process.

Recent projects involving major infrastructure restoration in Québec reflect this reality. Organizations that were not prepared to integrate ESG criteria missed out on large contracts.

Some of these companies then contacted us for immediate support, but it was too late to submit tenders.

2. Increase the value of your company through innovation

Integrating ESG criteria pushes leaders to rethink their traditional business models. This process often leads to:

• innovation;
• new revenue sources;
• a more sustainable market positioning.

For example, to adapt to the current context, a food processing business reviewed its supply chains and prioritized local suppliers, which reduced its greenhouse gas emissions.

These adjustments resulted in a 12% drop in logistics costs, new contracts with a large distributor and access to energy transition subsidies.

3. Attract and retain talent

Younger generations are redefining employee attraction criteria. According to several studies, 70% of young professionals now prefer to work at a company with a strong environmental agenda. This percentage rises to over 80% among professionals under the age of 35.

In light of the current labour shortage in Québec, ESG criteria have become added value to an employer's brand tool and a confidence vector for internal stakeholders.

4. Facilitate access to competitive financing

Québec's financial institutions are integrating an increasing number of ESG criteria in their financing decisions.

There are specific programmes to facilitate the energy transition and the integration of ESG criteria within your organisation.

Across Québec and Canada, several financing options for organizations integrating ESG criteria are available. They include:

• more than $9 billion from the Canada Infrastructure Bank, Export Development Canada and the Business Development Bank of Canada;
• specific Québec programs such as ÉcoPerformance and Technoclimat.

5. Reduce risk and anticipate legislative changes

The number of ESG regulatory requirements is constantly increasing. The Fighting Against Forced Labour and Child Labour in Supply Chains Act requires large organizations to submit an annual report on their procurement practices and entities that fail to comply are liable to a fine of up to $250,000.

In 2024, the European Union also introduced sustainability reporting requirements that affect over 50,000 organizations through its Corporate Sustainability Reporting Directive.

Anticipate risk

In addition to regulatory penalties, a lack of preparation with regard to ESG criteria can expose organizations to growing risks such as:

• higher interest rates for financing;
• increased insurance premiums;
• exclusion from markets where ESG has become a selection criterion;
• reputational damage in the event of poor management.

Conversely, improved management of environmental and social risk can pave the way for more favourable financing and insurance conditions while facilitating access to private capital and impact investment funds.

An investment rather than an expense

ESG investment leads to measurable performance that is reflected in an organization's financial statements.

ESG criteria are shifting from being a compliance issue to a competitive differentiator. Quebec SMEs that quickly integrate these practices can turn this market trend into a strategic advantage.

At Raymond Chabot Grant Thornton, we support SMEs across the province through this transition by leveraging our in-depth knowledge of local and sectoral realities. After all, our expertise can ensure your sustainable performance.

Call on a team of experts to support you every step of the way.