The global community is placing greater emphasis on sustainability or environmental, social, and governance (ESG) issues. While trading partners and regulatory agencies have imposed ESG-related rules and regulations, consumers are paying more attention to this matter. Businesses thus need to study and weigh positive and negative impacts from various alternatives in addressing the ESG issues. Though some operators may opt to continue their operations with no incorporation of ESG factors, possibly viewing that ESG is still far from universal adoption, others may focus on purchase of carbon credits to qualify for trading partners’ criteria; adjustment of activities or optimization of available resources to accumulate carbon credits per the established criteria; and improvement of production processes to reduce levels of carbon emissions. KResearch is of the view that ESG adoption of each business may vary, depending on their circumstances, financial resources and flexibility in taking action. Some alternatives could be adopted later, while it is more appropriate to take immediate action for certain options.
Due to limited financial resources and a highly uncertain economic and business context going forward, at first most businesses will likely adopt ESG practices that do not require substantial investment and have a degree of flexibility. Subsequently, they can gradually undertake further efforts based on the prevailing circumstances and their needs. If they opt for high funding right from the onset, they may be exposed to potential risks from the ever-evolving technology.
For instance, businesses may start with reduction of losses in production processes, waste management, and reuse or recycling. Additional actions may include well planning, choosing environmentally-friendly materials and raw materials, reducing electricity and water consumption, using electricity during off-peak hours, shifting to renewable energy like solar panel installation in factories, exploring low-emission choices for driving routes, changing from petrol cars to electric cars, managing logistics, deploying solutions or technologies to reduce wastage, etc. Based on these guidelines, SME businesses can take action or gradually make adjustments upon their suitable timing, and without high costs.
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