When I first joined Tees, I was pleased to learn what ESG meant, not just as a concept, but what it truly meant to embed environmental, social and governance values throughout our ecosystem. Fast forward to today, I am proud to be a part of a firm that has been shortlisted as “Responsible Employer of the Year” by the UK Property Forum Eastern Echo Awards 2025. But it’s not just about awards, many of us still ask why is ESG so important? What are the genuine legal obligations? And how does it impact corporate growth?
What does ESG mean in a business context?
ESG is about how a company manages risks and opportunities related to environmental, social and governance factors. This can include examples like:
- Environmental: Carbon emissions, climate impact, waste reduction, energy efficiency.
- Social: Employee wellbeing, diversity and inclusion, human rights.
- Governance: Board accountability, executive pay, ethics and anti-corruption
It’s no secret that for many businesses, ESG began its journey as a reputational tool, for example, something that looked good in annual reports and presentation decks. But today ESG is no longer just “the right thing to do”, it’s a critical part of a company’s corporate governance.
ESG is a legal duty
Directors owe duties to act in the best interests of the company and today there is a growing understanding that “best interests” comprises long-term value which includes ESG related issues like environmental impact, workforce practices, supply chain ethics and good corporate governance.
The Companies Act 2006 specifically states under Section 172 that directors must act in a way they consider in “good faith” to “promote the success of the company for the benefit of its members as a whole,” and have regard to factors such as:
- The need to foster the company’s business relationships with suppliers, customers and others;
- the impact of the company’s operations on the community and the environment; and
- the desirability of the company maintaining a reputation for high standards of business conduct.
These are all written in law and form a director’s statutory duties – which means that ESG considerations when they fall within these areas are not optional. They are a legal requirement! Boards that ignore these factors, particularly in today’s world of growing climate, social, and ethical risks could be seen as breaching their statutory duties.
ESG is about action
For lots of businesses I talk to today it remains clear that ESG is no longer just about values or vision statements it’s about taking actual action and implementing policies. A huge legal risk currently in the market is “Greenwashing”. Greenwashing is making inflated or misleading claims about a company’s environmental practices, so for example, relying on historic practices or initiatives to portray a business as more environmentally responsible than it really is. If a company says it’s sustainable, carbon neutral, or ethical, it needs to be able to back it up with real evidence. The time of saying the right things without doing the right things is over.
Various regulators across the UK, in response to rising concerns about corporate greenwashing are tightening their own standards. Smaller and medium sized businesses are expected to adhere to requirements from regulators, industry bodies, and government guidance. Whilst larger limited companies, PLC’s and financial institutions will be required to adhere to the Sustainability Disclosure Standards (SDS) which sets the UK’s ESG reporting standard- this is expected to be finalised this summer.
To sum up, ESG now demands real action and regulators expect proof!
So how does ESG contribute to business growth?
ESG plays a powerful role in shaping how businesses grow, adapt and connect with the people who matter most.
From a personal perspective, ESG aligns with what people care about. I see it first hand amongst my colleagues, friends, and family that people want to work for organisations that they can be proud of, that are inclusive and contribute positively to the world. I know I certainly do! In turn, this can attract top talent and retain staff levels.
Likewise, clients, employers and partners are paying attention to what businesses stand for and trust builds brand loyalty. Those companies caught involved in unethical practices risk reputational damage.
Investors are now also demanding ESG responsibility, failing to meet certain expectations can significantly limit financial gain.
Additionally, risk management is huge, companies with strong ESG policies are able to manage and mitigate risk better – whether it is supply chain issues or governance failures. ESG also drives innovation as it can encourage businesses to find smarter and more sustainable ways to operate.
Finally
Hopefully, it’s clear that ESG is not just about doing good—it’s about doing business well. It is both a legal obligation, a recipe for growth and businesses cannot simply treat ESG as a side issue or branding tool – it must be embedded into the heart of corporate governance and decision-making.
