Investment in ESGs and company profits

by Gwenda Gu

Due to an increased exposure and easy-access of information, more companies start to realize the crucial role of sustainability in both internal and external business environment, especially under the driving wave of SDGs. This puts a strong emphasis on ESGs (environment, soiety, governance) in business activities, encouraging an integrated, ethical approach to sustain future resources. According to PWC’s survey in 2021, there’s a positive correlation between investment in ESGs and companies’ profits, such that companies’ attitudes towards ESGs shift from mere compliance to value creation. Therefore, being sustainable is no longer a “should or should not” question. It has already integrated into businesses’ everyday strategies.

Specifically, for “SDG13: Climate Action”, Australia committed to reduce GHG emissions by 26-28% below 2005 levels by 2030 under Paris Agreement. To achieve this target, Australian government launches Climate Initiative. Cooper Energy Ltd. (ASX: COE), a renowned Australian oil and gas company, is certified under this program. It offsets carbon emissions in production processes by investing in a planting project in Coorong, Adelaide, being their long-term strategy to prevent potential risks of high carbon taxations and customer switching towards more environmentally-friendly energy. Whilst oil and gas seem to be the most harmful industry to global climate, Cooper Energy proves that it also has the capability to become carbon neutral. Hence, sustainability could be achieved through various means, and essentially benefiting the business in long-term.

However, since most businesses aim for profit maximization, how can we draw the line between  truly sustainable and “greenwashing”? Accounting information could play a crucial role in supervising businesses’ sustainable performance because unethical behaviors such as greenwashing are essentially caused by information assymetry between companies and the public, whilst accurate disclosure helps to eliminate this gap. Hence, we should be confident that businesses are able and capable to achieve sustainability.