Though the craze around environmental, social and governance (ESG) has simmered some – both in support and in opposition – we’re continuing to see companies voluntarily release reports and incorporate it into long-term business strategies.
As someone with a career in financial services and a passion for helping disadvantaged communities become thriving participants in the national economy, I believe ESG reports are a strategic way for businesses to focus on long-term impact on local economies, communities and the environment.
A recent example is CSX Transportation, a leading supplier of rail-based freight transportation.
Not long ago, CSX released its 2023 ESG Report, which highlighted the company’s major advancements in addressing important matters through “alternative fuel projects, investments in safety innovations, and enhancements to the employee work environment.” At its Curtis Bay Piers in South Baltimore, this included being awarded $11.6 million in federal grants to acquire three battery-electric, zero-emissions locomotives and a battery charging station. This is especially notable as it was the first zero-exhaust train at an East Coast port and will help to reduce emissions and noise for the surrounding community.
Even with local groups and officials in Baltimore calling for stronger regulations on trains and industry in the area, CSX still released its ESG report detailing their Scope 1, 2 and 3 greenhouse gas emissions. Though the community is justified in the pursuit of a cleaner environment, there are other ways to go about it without increasing government regulations. Especially when the company is being so transparent about its emissions – even going as far as having a website that reports live particulate matter in the community.
While some companies, like CSX, are continuing forward with ESG reporting, others are taking a step back. One company published a 2024 investment stewardship report in which it said it supported only 4% of environmental and social proposals – a drastic decrease from the 21% supported in 2021. The reason given was that the objectives were “unlikely to promote long-term shareholder value.”
I disagree with that notion. Companies releasing ESG reports is a fiscally smart move, in addition to being good for the broader environment and communities.
A recent research paper found when companies prioritize ESG, it positively influences their overall value. At the same time, it found that focusing on nonmaterial ESG factors can cause a decline in value. This simply means companies need to walk that fine line of ensuring their ESG initiatives are fiscally beneficial as well. And obviously, this can be done.
For example, Walmart launched Project Gigaton in 2017 aiming to eliminate one gigaton of greenhouse gas emissions from its global value chain by 2030. Though this is certainly an environmental initiative, it’s also a smart business decision. By reducing energy consumption and increasing efficiency, costs are lowered throughout their entire supply chain. It also positioned Walmart as a leader in sustainability efforts early on, which can enhance brand reputation and customer loyalty – factors that have significant long-term financial benefits.
Similarly, CSX reported engaging suppliers in CDP’s Supply Chain program to “improve sustainability of operations and reduce the carbon footprint of the company’s value chain.” This entails having Tier 1 suppliers report environmental data to CDP and work closely with them to ensure sustainable practices and carbon reduction strategies. In 2023, CSX engaged 63 suppliers and have a goal to double that engagement this year.
A focus on responsible sourcing within supply chain efficiency has long-term monetary benefits, too. Environmental initiatives increase fuel efficiency, in turn reducing emissions, which ultimately benefits the communities they serve while also providing better services and smooth deliveries and customer experiences.
It’s simple math; Satisfied customers equal better business.
As both a financial professional and resident of the DMV (DC, Maryland, Virginia) area, I hope to see other companies continue to be transparent and release reports on their environmental, social and governance initiatives and successes. It’s always great to see companies taking it upon themselves to acknowledge their role and impact on the environment, communities, and economy.
