The crucial importance of ESG in modern business

If you’re still considering whether ESG (Environmental, Social, and Governance) is meaningful for your business, the simple answer is that it already is.

Across all sectors and regions today, ESG has evolved from being a mere ‘nice to have’ to becoming the critical currency of trust, an essential key to securing capital, and a vital differentiator in a crowded market.

In my first column, I highlighted how ESG is laying the groundwork for sustainable business practices.

In this edition, let’s shift our focus from theory to tangible proof by exploring real-world examples that demonstrate how ESG is transforming the business landscape, sometimes for better, sometimes for worse.

How ESG has secured a future for businesses

1. Access to capital: Flour Mills of Nigeria’s partnership with the IFC

In 2023, Flour Mills of Nigeria successfully obtained $75 million in long-term funding from the International Finance Corporation (IFC).

This funding aimed to bolster food security and promote climate-resilient operations.

This wasn’t merely about expanding the business; it was an investment firmly aligned with ESG principles.

The company’s dedication to responsible sourcing, effective governance, and sustainable environmental practices opened this financial door.

Lesson: Companies that have achieved maturity in ESG practices gain greater credibility with investors, particularly global capital providers who assess ESG risks before committing.

2. Market growth: Unilever’s sustainable brands strategy

Unilever has reported that globally, its most sustainable brands, such as Dove, Hellmann’s, and Lifebuoy, are growing approximately 50 percent faster than the rest of its portfolio.

Unilever identifies these brands as most advanced in their journey towards achieving sustainability goals, deeply connected to social or environmental missions.

The data indicates that consumers support brands aligning with their values.

In Nigeria, Unilever’s strategy incorporates gender inclusion, waste reduction, and ethical sourcing. Consumers take notice and reward businesses that share their values.

Sue Garrard, who is Unilever’s EVP of Global Sustainable Business & Communications, stated, “People want brands to do more good, not just do less bad.”

Lesson: ESG isn’t merely about compliance with regulations; it’s a growth strategy. Alignment with consumer values secures loyalty and market share.

3. Cost efficiency/risk reduction: Dangote’s climate strategy

Dangote Cement has made significant investments in alternative fuels and energy efficiency.

In 2021, the company released its first report based on the Task Force on Climate-related Financial Disclosures (TCFD), a global ESG standard.

Their investments are not solely about being environmentally friendly, but they effectively reduce energy costs, mitigate climate risks, and enhance long-term competitiveness.

Recently, the Dangote group has transitioned its fleet of diesel-powered trucks to Compressed Natural Gas (CNG). It is projected that fuel savings in the first year might result in a 150 percent return on initial investment.

Lesson: ESG is not a cost burden; it serves as a tool for risk mitigation and resilience in volatile environments like ours.

Consequences of overlooking ESG

1. Denied capital: The oil & gas ESG squeeze

Several Nigerian oil and gas firms are now experiencing pressure from investment decisions driven by ESG criteria.

Major global funds and insurers are beginning to pull investments from portfolios heavily reliant on fossil fuels.

Due to ESG mandates, global fossil fuel financing has dropped by 39 percent since 2020.

This trend shows no signs of abating.

Lesson: Lacking ESG principles can make access to capital difficult.

2. Damage to reputation: Fast fashion backlash

On a global scale, brands such as H&M and Zara have faced significant consumer backlash and boycotts due to alleged labour violations and unsustainable practices. This trend could soon become a reality in Nigeria due to a highly globalised youthful population.

Lesson: Social and governance missteps can swiftly deteriorate brand equity and invite public scrutiny, especially in today’s social media-driven world.

3. Exclusion from global supply chains

SMEs and suppliers who fail to meet ESG standards are increasingly finding themselves shut out of global supply chains.

Large companies with commitments to net-zero emissions and responsible sourcing policies now insist on traceable and ethical practices from every link in their value chain.

Lesson: Adhering to ESG standards is rapidly becoming a trade passport, while non-compliance is becoming a barrier.

Why Nigerian businesses must act now

The question is no longer whether to adopt ESG practices; it’s now about how quickly one can do so.

Operating in a dynamic and high-risk environment, Nigerian businesses should not see ESG as just an external obligation.

Instead, ESG represents a strategic shield, offering access to more capital, better talent, stronger customer loyalty, and long-term viability.

Whether you’re managing a manufacturing business in Aba, a fintech startup in Lagos, or a family-owned agro-business in Edo, integrating ESG is now essential for strategic survival.

Companies that embrace ESG today are poised to become the giants of tomorrow.

Where to start?

1. Conduct a simple ESG readiness assessment to identify risks and opportunities.

2. Focus on one or two ESG priorities linked to your sector – waste reduction, energy efficiency, or employee wellbeing.

3. Start small, start now; document efforts, set clear goals, and engage stakeholders.

This column will continue to highlight local success stories and provide tools and frameworks to help on your ESG journey.

Sarah Esangbedo Ajose-Adeogun is the Founder and Managing Partner at Teasoo Consulting. She previously held the role of Community Content Manager at Shell Petroleum Development Company and served as the Special Adviser on Strategy, Policy, Projects, and Performance Management for the Government of Edo State. She also hosts the #SarahSpeaks podcast on YouTube @WinningBigWithSarah, offering her insights on leadership, strategy, and sustainable growth.