Organisations are increasingly keen to display their green credentials and earn recognition for employing sustainable supply chain strategies. Yet there remain many misconceptions around ESG and sustainability. Vincent Beerman, head of platform and ESG at Taulia, looks to dispel some of the more common sustainability myths.


Environmental, social and governance (ESG) – a term coined nearly 20 years ago in a UN report entitled ‘Who cares wins’ – is an approach to evaluating the performance of a business that goes beyond just shareholder return. ESG instead takes into account the ways that a company manages its performance across environmental protection, social responsibility and corporate governance.

Addressing ESG in the supply chain is a significant trend that is influencing decisions across procurement, finance and treasury departments. Deutsche Bank analysts say that 95% of all assets under management will fall under the ESG umbrella by 2030, with the main driver being data that suggests that ESG impacts risk and return rates.

According to estimates from Bloomberg Intelligence, meanwhile, ESG assets are set to exceed US$50tn worldwide by 2025.

As a result, CEOs and corporate boards are under increasing pressure to create real change, both within their organisations and throughout their supply chains.

Yet despite this increased focus on ESG, an element of scepticism remains. There’s little doubt that ESG values can help boost the image of a company or brand – but is ESG just a short-lived phenomenon, or a PR strategy that’s based on hype rather than concrete benefits to society or the environment? And can ESG strategies only be delivered if a firm is large enough to have the right resources in-house?

Let’s take a closer look at some of the frequent myths around ESG, and why these may arise from misinformation and misunderstandings.


  1. “Having an ESG programme is too expensive”

A common misconception is that initiatives designed to address ESG issues lead to reduced financial returns for a company. Far from underperforming, the reality is that sustainable investment strategies tend to do at least as well as – and in many cases, better than – conventional strategies. By its nature, ESG promotes resource efficiency, builds up social capital and encourages strong and effective governance – all of which have an impact on a company’s financial performance.

Rather than seeing the embracing of ESG initiatives as negatively impacting a business’s performance, many large organisations (and an increasing number of smaller ones) regard the implementation of ESG initiatives not in terms of a cost to the business, but as an investment. In the short term, the returns on such investment might be in the form of a greater appeal for customers of a business’s products, or a more motivated and committed workforce. In the longer term, avoiding clear-up costs resulting from environmental damage, for example, could result in significant savings. At the same time, companies that implement ESG initiatives are becoming more attractive to investors who are willing to pay a premium for their investments.


  1. “ESG is just a fad”

Sustainability as a corporate priority is unlikely to wane. Financial regulatory bodies worldwide have noted the costs exacted by recent catastrophic weather events and they will require public companies to disclose potential environmental risks. Similarly, ESG is increasingly being recognised by legislators and regulators as a priority that’s here to stay.

The US Securities and Exchange Commission (SEC) recently released a proposed rule for mandatory climate disclosure from all publicly listed US companies, called ‘The Enhancement and Standardisation of Climate-Related Disclosures for Investors’. This rule would require public companies to provide climate-related data and disclose the emissions for which they are directly responsible, as well as those from their supply chains and products.

With this proposed rule, the SEC is responding to the need by investors for precise, consistent and comparable reporting from companies – to both more clearly communicate valuable investment insights, as well as ensure financial markets can properly price and act on the physical and transitional risks and opportunities of climate change.

In Europe, meanwhile, the European Securities and Markets Authority recently published its ‘Strategy on Sustainable Finance’, setting out the intention to place sustainability at the core of its ethos and regulatory activity over the next decade.

Given these trends, it’s hard to see how the current focus on ESG and sustainability could be short-lived.


  1. “ESG is no more than a PR strategy”

With pressure to commit to driving ESG improvements, there has been a trend of businesses that want to claim to be sustainable and caring about the environment and society without truly improving their own performance or processes in these areas. This is called ‘greenwashing’ – a marketing strategy that involves exaggerating an organisation’s green credentials and seeks to gloss over the true activities of a company with a ‘green sheen’.

Now we are not denying that greenwashing is a concern – in a recent anonymous Harris Poll for Google Cloud, 58% of CEOs and other C-suite leaders admitted that their companies were guilty of greenwashing.

Yet while good PR can be a benefit of making positive ESG improvements, there needs to be more transparency and less subjectivity to prevent such claims of greenwashing, while maintaining true environmental, social and corporate governance progress – the true bedrock of an ESG strategy.

One such method to achieve this transparency is the use of third-party ESG ratings organisations in sustainable trade and supply chain finance. With such a programme, business leaders have the opportunity to build on their own proactive ESG efforts by encouraging suppliers and partners to report reliably, consistently and comparably against globally recognised benchmarks.


  1. “It’s too complicated to set up an ESG strategy”

Up to 90% of a company’s environmental footprint lies in its supply chain – which may seem a daunting prospect when attempting to incentivise suppliers to adopt more ethical or sustainable practices.

Thankfully, there are options to support the development and approach of a business’s ESG vision, with guidance on establishing measurable targets, structuring financial incentives and selecting the right funders.

Options such as Taulia’s Sustainable Supplier Finance solution make it far easier for companies to identify the most responsible and sustainable suppliers while encouraging suppliers to improve ESG performance with financial incentives. This allows businesses a straightforward method to source more responsibly, build a more sustainable supply chain and create meaningful social change.

While certain misconceptions and myths may hinder companies’ efforts to drive sustainability improvements, it’s clear that the current focus on ESG is here to stay. The myths mentioned in this article are simply excuses to not engage in something we all recognise as vitally important.

Aiding companies in their development of an efficient, flexible and sustainable approach to an ESG strategy is something that Taulia, and I, take very seriously. Our vision is to add a sustainability layer across all three levers of working capital, namely payables, receivables and inventory. Our networked approach to financing can scale to give suppliers who best meet sustainability criteria access to capital that enables ESG improvements as they grow.

By choosing your ESG data source and deciding which discount tiers to use for early payments, you can offer participating suppliers the opportunity to benefit from ESG discounted rates. Our initial ESG offering is designed to support suppliers with a solid, reliable liquidity solution through a buyer’s payables. Ultimately, suppliers will be able to leverage their ESG qualifications through the network to get discounts from additional buyers, as well as have access to green or other purpose-driven funds using some or all of their receivables portfolio.

By reaching deeper into the supply chain than any other provider, Taulia’s Sustainable Supplier Finance solution enables funds to be disbursed more equitably. Rather than just limiting implementation to a select few, the solution is designed to be rolled out to every supplier, making it truly inclusive.