ESG for the OTC Market. What is it, and why is it important?

Are you feeling the pressure to get started with ESG reporting? Are investors or insurance companies asking you ESG related questions? Do you think you’re being screened out by funds or analysts for not having ESG credentials? 

If you’ve answered ‘yes’ to any of these then you should read on. This article explains the growing importance of ESG, and offers 5 simple steps to help you begin your journey. 

Action on Environmental, Social and Governance (ESG) issues is no longer a ‘nice to have’. It’s essential if you’re seeking investor capital and social license to operate. The initial reason to start ESG reporting is often to respond to demands from stakeholders. However, in building ESG practices across their business, many companies report an easier path to a much wider investor base, risk mitigation, new market opportunities, and long-term sustained value generation.

Investors, customers, consumers, employees and society are expecting companies to grow in a financially sustainable, yet environmentally viable way. ESG is used by institutional and socially conscious investors to screen companies prior to investing. It’s also looked at by consumers and employees when they’re making decisions about what companies to get behind. 

What does ESG entail? 

E – Environmental – can include things like resource conservation and emissions
S – Social – can cover issues like equal pay, diversity and inclusion, health and safety
G -Governance – asks you to disclose your board composition, your purpose and the rules you play by. 

ESG misconceptions of microcap executives

Multinationals and large publicly listed companies know that ESG reporting is a must these days. But when it comes to microcaps, a number of common misconceptions still exist. Some executives discount the value of ESG entirely, while some feel the pressure and urgency around ESG but are unsure how to act on it.

Socialsuite speaks daily to executives about the misconceptions surrounding ESG reporting. These include:  

Misconception 1: ESG is only for sustainable businesses and industries.

ESG is about transparent and responsible operation and governance of your business and it’s industry-agnostic. ESG helps identify critical business risks, but can also create business value – so it should be central to every decision.

Misconception 2: We need to have attained ESG perfection before reporting on it.

Simply starting to report and disclose ESG metrics today demonstrates a commitment to ESG transparency. Perfection is not required and metrics can be improved over time — there’s no reason to wait.

Misconception 3: My investors don’t care. 

The days of investors focusing solely on financial statements are long gone. If you want to attract retail investors, institutional investors or fund managers, you’ll need to meet ESG criteria.

Indeed, The Wall Street Journal quotes, “91% of GenX retail investors are willing to lose their investment dollars in order to achieve ESG Goals.” The take home? Today’s investors care about ESG – and they’re using ESG factors to make decisions on their investments.

Misconception 4: ESG does not align with our core priorities. 

While you may not think of ESG as a priority, a strong ESG proposition can safeguard a company’s long-term success. ESG is a global priority, so if ESG is not a priority for your business, ask yourself why?

Socialsuite client, Thomson Resources (OTCQB:TMZRF; ASX:TMZ) for example, is creating value through ESG as quoted by David Williams, Executive Chairman “By making a commitment to ESG in 2021 and delivering our first report, we are demonstrating our responsibility towards long-term, sustainable growth for the benefit of all of our stakeholders including our customers, employees, shareholders and communities in which we operate.”

Getting Started with ESG: Five simple steps

Socialsuite’s Chief Impact Officer, Dr. Siegenbeek van Heukelom says the microcaps he works with already have ESG data  they publicly disclose – often more than they realize, but they’ve never been collated in one place before. “There could be much you’re already doing. This is about making it visible to the market. Let’s find the quick wins. Then we can talk about how you can progress and improve your ESG credentials over time.”

Many companies start ESG reporting in response to stakeholder demands. But it often turns out to hold far more value. But how do you get started? 

1. Set a baseline

ESG frameworks allow companies to measure responsible and sustainable corporate growth and business continuity in a structured and standardized way. Choose a global framework, such as the World Economic Forum (WEF) Stakeholder Capitalism Metrics, and start populating it with the data you already have. Think about the opportunities and risks that matter most to your company and its stakeholders.

2. Embed ESG into structures and processes

Make sure ESG is on your Board’s agenda, and then embed ESG into your everyday decision making and operations. 

3. Seek an external view

Working with expert partners can help you stay accountable, build knowledge, help validate your findings and identify opportunities for improvement. 

4. Amplify your message

Once you have a regular reporting cycle of disclosures, you can spread those messages to investors and other stakeholders. Make sure your reports are clear – avoid technical ESG jargon, and visualize the data. 

5. Maintain the momentum

ESG is a continual journey of positive change. Report frequently, stakeholders want to see quarterly updates on your ESG highlights and progress. Think of ESG reporting as a roadmap – and know that your investors, employees, customers and society will use it to hold you to account. 

How Socialsuite can help

Socialsuite’s ESG platform is ideal for micro to mid caps who are just starting their ESG journey and looking to report against the globally recognized WEF Stakeholder Capitalism Metrics ESG framework.

With this fit-for-purpose approach, smaller listed or private companies no longer need large ESG teams to provide robust and transparent ESG reporting. They can share ongoing progress through quarterly updates, publish investor relations reports, access comprehensive ESG resources and make incremental progress with the support of a dedicated ESG coach. 

When getting started with Socialsuite, Dr Sandy Chong – Non-Executive Director of critical mineral company FYI Resources (OTCQX:FYIRF; ASX:FYI), said “We want people to understand what ESG means and that for us, it is more than just the ‘E’ or being a clean resources company. ESG is adopted as a business-wide practice that encompasses everything we do from our day-to-day operations to how we create a more sustainable, equitable workforce..”

Socialsuite’s cost-effective, action-oriented platform is so simple you could be building your baseline report within an hour – and start reporting publicly in just 30 days.

Visit www.otcmarkets.com to learn more and check out our other recent posts.

Visit Socialsuite to learn more.

Our Guest Contributor section features articles, thought pieces and blog posts from industry experts on capital markets topics. Articles are reposted with permission.

%d bloggers like this: