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The Imperative of ESG for Business Sustainability

Mohammad Monower Hossain, Sustainability Professional

Group Head of Sustainability at TEAM Group

In today’s world, ESG (Environmental, Social, and Governance) is not merely ornamental; it is a fundamental pillar of business sustainability. While many startups achieve rapid, exponential growth in the short term, they often neglect the sustainability of their operations. These companies tend to focus almost exclusively on growth, driven by a philosophy of resource accumulation rather than developing a resilient organization. As a result, many of these companies face abrupt falloffs, particularly during generational transitions. According to stats only 30% of family-owned businesses survive in the second generation. Looking into the booming private sector of Bangladesh around 90% of the companies are family-owned businesses. Family-owned businesses in Bangladesh faces some common challenges, such as succession planning, governance issues, and the need to balance family and business interests, making the integration of ESG principles even more relevant for their long-term sustainability.

ESG for Business Sustainability

From a governance perspective, many companies bypass systematic approaches in favor of tailored methods designed to maximize short-term profits. While this strategy may yield immediate success, it often leads to long-term failure. In Bangladesh, numerous corporate giants have grown under the leadership of a single, central figure with limited transparency. The departure of such leaders frequently leaves these companies vulnerable, highlighting the risks of authoritarian leadership and its detrimental impact on fostering new leaders and ensuring organizational resilience. In the year 2013 the number of active export-oriented garment factories in Bangladesh was nearly 7000 which has been reduced to around 3000 active factories. On a contrary the export volume of 2013 was USD 23.5 BN and export volume of 2023 was USD 47.3 BN. So, it is evident that a good number of factories closed in this journey due to many factors including but not limited to workplace safety, minimum wage revision, change in laws and regulations, corona pandemic, Russian war and so many things. We cannot expect a bed full of roses while we run a business there will be external and internal shocks and many unwanted event, but as it said “The Show Must Go On” how do we make sure that the business has achieved resilience to absorb the shocks and continuing? Well, there is no single answer to it but is obvious that a business shuts mostly due to management failure. So it is important that we should focus more on a system based on strong governance that would never let a company fail abruptly.

Neglecting the imperatives of ESG is detrimental for organizations today. Consider the example of “Sadek Agro.” This company experienced rapid growth and substantial profits, but its disregard for ESG principles ultimately led to its downfall. Built illegally on natural wetland, with opaque pricing mechanisms and a lack of governance and transparency, Sadek Agro quickly collapsed. While branding, social media marketing and hype can generate short-term profits, they do not foster sustainable growth or benefit the broader community.

Sadek Agro’s story is a cautionary tale about the importance of ethical business practices. The company’s rapid rise was marked by aggressive tactics and a blatant disregard for environmental regulations and transparency. However, these shortcuts created a foundation of instability that could not support long-term success. When external pressures and internal deficiencies converged, the company crumbled, leaving employees, suppliers, and the local community in a precarious situation.

For a company to thrive and endure, it must serve not just its owners but also its employees, management staff, community members, government, and all other partners in the value chain. This comprehensive approach to ownership and commitment to ESG principles is essential for long-term survival. Companies that embed ESG into their core strategies are better equipped to navigate challenges, adapt to changing market conditions, and build trust with stakeholders.

Environmental responsibility involves more than just compliance with regulations; it requires proactive efforts to minimize the ecological footprint of a business. This can include adopting renewable energy sources, reducing waste, and conserving natural resources. Companies that prioritize environmental sustainability not only contribute to the health of the planet but also often realize cost savings and operational efficiencies.

Social responsibility extends to how a company treats its employees, customers, and the communities in which it operates. Fair labor practices, diversity and inclusion initiatives, and community engagement are crucial components of a socially responsible business. Companies that invest in their workforce and contribute positively to society tend to enjoy higher employee morale, stronger customer loyalty, and a better reputation.

Good governance is the backbone of a sustainable business. It involves establishing transparent and accountable decision-making processes, fostering ethical behavior, and ensuring compliance with laws and regulations. Strong governance structures help prevent fraud, corruption, and mismanagement, creating a stable and trustworthy organization.

The integration of ESG principles is not just a trend; it is a strategic imperative for businesses seeking to achieve sustainable success. Companies that embrace ESG are more likely to attract investment, retain top talent, and build lasting relationships with customers and partners. Moreover, they are better positioned to anticipate and mitigate risks, ensuring their long-term viability.

In conclusion, the importance of ESG in business sustainability cannot be overstated. The downfall of companies like Sadek Agro serves as a stark reminder of the consequences of neglecting these critical principles. By prioritizing environmental stewardship, social responsibility, and strong governance, businesses can create a resilient foundation for growth and success, benefiting not only their owners but also their employees, communities, and the broader society.

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