I'm happy to report that natural and organic product businesses are increasingly recognizing the importance of integrating ESG criteria into their operations. ESG represents a set of standards for a company’s behavior across three areas—Environmental, Social, and Governance—that investors, consumers, and employees use to evaluate corporate responsibility.

To be clear, there are many conservative people and brand leaders who despise ESG and even try to remove it from their brands or make it illegal (just like many are attempting to make DEI illegal within public institutions or their private brands). It’s shameful and it indicates a real disconnect between profit-driven companies and the communities they serve. It also indicates a lack of understanding about how profitable companies can improve and better themselves and pursue objectives that are clean, green, and ethical.

But a lack of conservative understanding doesn’t mean progressive companies should stand by and watch it happen, or that they should shy away from implementing their own strong ESG standards because they don’t want to lose a particular (though conservative) investor.

In fact, especially for my herbalists, soap makers, chocolate, food and beverage, skincare, cosmetics and clean beauty brands, this is the time to be loudly proclaiming your ESG standards and standing by them 100%. By prioritizing ESG, businesses are positioning themselves not only for profitability but also for positive impact, benefiting communities, shareholders, and the planet alike. These are positive and immensely helpful measures and criteria that businesses should embrace.

What Does ESG Mean?

The acronym stands for environmental, social and governance and is a broad perspective or lens through which you can measure how you're doing as a company to support the earth, your community, and the way you lead.

1. Environmental (E): This measures how a company impacts and manages resources related to the earth. It includes technical practices like carbon emissions reduction, waste management, renewable energy adoption, and resource efficiency. Companies with high environmental standards aim to minimize their ecological footprint and address climate change. (Hint: carbon offsets are a form of greenwashing and are NOT considered valid or useful practices and should be avoided; instead, opt for real environmental supports such as changing from a polluting vendor or switching ingredients in your products.)
2. Social (S): The social aspect of ESG is a brand's approach to people and society. It considers employee relations; diversity and inclusion in hiring and promoting; fair and equitable wage practices; positive and lasting community engagement; customer privacy; and respect for human rights. Social responsibility is through actual practices, policies, and marketing words and phrases.
3. Governance (G): Governance refers to a company’s leadership, ethics, accountability, and transparency. It includes board diversity, executive pay, ethical business practices, honesty in labeling and marketing, and shareholders' rights. You WANT to be transparent and align your objectives with your stakeholders' interests (not just your shareholder's investments).

Why ESG Matters Today

The ESG movement is more than a trend; it’s a shift in how businesses operate, fueled by skyrocketing demand from customers for true and actionable accountability and responsibility. Businesses that adopt ESG not only strengthen their brand image but also reduce risks, become more efficient, and attract more customers and better team-members.

1. Investor Demand: Investors are increasingly looking at ESG as a measure of financial resilience. They recognize that companies with strong ESG are more likely to manage risks effectively, adapt to regulatory changes, and maintain long-term profitability. In fact, ESG-focused funds have surged globally as investors (rightfully) prioritize sustainable and ethical investment.
2. Consumer Expectations: Consumers today are more informed and they make their buying decisions based on a company’s ESG record. Customers support brands that align with their values, and many are willing to pay extra (up to 27% more) for products from well-regarded, transparent, environmentally and socially responsible companies. A 2021 study showed that 83% of millennials, a huge consumer base, consider ESG when choosing where to spend their money.
3. Attracting Team Members: Employees are increasingly looking to work for companies that reflect their personal values, especially around sustainability, diversity, and fair practices. A strong ESG commitment can become a significant competitive advantage in recruiting and retaining talent, fostering a culture of purpose and engagement, improving job satisfaction, and earning loyalty.

The Benefits of ESG for Businesses

Don't let your conservative uncle fool you: ESG is good for business. It's especially valuable if you are a certified or aspiring B Corp, but equally important for all businesses:

1. Risk Management: ESG businesses are better equipped to identify and manage risks, especially in our climate-risky world. By focusing on environmental sustainability, companies can avoid costly regulations, fines and potential environmental liabilities. Socially responsible companies reduce the risk of labor disputes and negative publicity. Good governance looks ahead, adjusts to meet environmental needs, and minimizes the risk of financial scandals and unethical practices.
2. Financial Performance: Studies have shown that ESG companies tend to outperform their peers financially. A company’s ESG score can be a reliable indicator of stability and long-term performance. For example, companies that proactively address environmental concerns often reduce waste and energy use, resulting in cost savings. Well-governed businesses typically have lower levels of regulatory penalties and legal risks.
3. Brand Loyalty: Companies that commit to ESG build deeper relationships with consumers based on values. Brands like Patagonia and REI, which emphasize environmental responsibility, have highly loyal customer bases.

Challenges and Criticisms of ESG

While ESG has significant potential, there are also challenges that come with implementation:

1. Data Transparency and Standardization: One of the primary issues with ESG is the lack of standardized metrics and reporting. There is no one-size-fits-all benchmark or measurement for what is "good" ESG. Different organizations measure ESG factors differently, making it challenging for investors to compare companies accurately. Efforts are underway to create more uniform standards, such as those by the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB).
2. Greenwashing: Some companies may engage in "greenwashing"—presenting themselves as more environmentally or socially responsible than they actually are. This erodes public trust in words such as sustainable, natural, organic, environmentally friendly, and conscientious. It's essential for a brand to use a credible third-party audit to report its ESG performance.
3. Short-Term Costs: It's true: it's expensive to do things right. For some businesses, implementing ESG may require significant upfront investments, such as updating facilities or reconstructing supply chains (read: firing one vendor and hiring another). However, the long-term benefits often outweigh the initial costs.

ESG as a Step Forward for Businesses

Who wouldn’t want to be hired by a company who truly values you as an employee? Or work for a brand that does everything it can to keep its environmental footprint lower? These are real issues with tremendous consequences, and many job-seekers and leaders value ESG companies over those that are trashing the planet and squeezing women out of an equitable opportunity.

ESG isn’t just an optional strategy; it’s rapidly becoming essential for businesses that want to succeed in today’s complex and conscious market. Companies that prioritize ESG are better positioned to adapt to future regulations, navigate challenges, and maintain strong relationships with their stakeholders. And as the ESG movement continues to grow, it’s likely to reshape industries by setting higher standards for what it means to be a responsible business.

By investing in ESG, even smaller companies such as small-to-medium natural and organic brands can make a proactive choice to align their profit goals with positive social impact. You can become more resilient while contributing to building a more sustainable and equitable global economy. 

Natural & Organic Brand Consulting

Bellebuono International is an enthusiastic supporter of natural and organic product brands, including herbal and aromatherapy, clean beauty and cosmetics, chocolate, tea and coffee, and organic food and beverage. Our online course Natural Brand Certifications teaches the environmental and social commitments your business or brand can make, including B-corp, organic, fair trade, WBENC, and cruelty-free.

Our powerful coaching services walk your business through these processes and help you strategize and build a solid business plan and vision. We provide the business services you need as a small to medium organic brand, including strategy and business planning, leadership coaching, customized course design and build, and speaking services for events.