The Simple Guide to ESG in the Supply Chain: Generating ROI (Part 3 of 3)

A 2022 report from the International Renewable Energy Agency (IRENA) showed that planned investment in clean energy must increase to a total of $131 trillion by 2050 to cap the rise in average global temperatures at 1.5 degrees Celsius. IRENA estimates that every dollar spent on the transition from fossil fuels to renewable energy should yield benefits valued at between $2.00 and $5.50.

These figures are daunting, but they are only part of the big picture. Ultimately, people decide what companies, communities and countries do to protect the planet, profits and their specific interests. E, S and G are inextricably linked and require tradeoffs. For example, banking giant HSBC stepped up its climate actions to avoid a shareholder revolt in 2021. As a result, HSBC also began leaving profits from thermal coal customers on the table.

There is no one “right” ESG path. As discussed in Part 2 of this 3-part series, a firm’s ESG actions should reflect the company’s mission and strategy. While tradeoffs are inevitable, it’s important to remember that ESG and ROI are two sides of the same coin.