By Sara Counihan
ALEXANDRIA, Va.—ESG, which stands for environmental, social and governance, is a popular buzzword in the business world. Many convenience retailers are asking themselves if ESG is imperative to their businesses. If it is imperative, what can retailers do about it right now? This week’s Convenience Matters podcast episode dives into what ESG means for the convenience industry.
ESG has evolved from corporate sustainability reports to what it is now, said Ryan Scott, vice president, HBW Resources.
“What it started off as was an effort to show communities, show governments and just show shareholders that these companies are essentially good actors and to say, ‘look, we invest in these schools, we care about your community, we hire locally. If you operate internationally, we use local content.’ … It covers a lot of ground,” said Scott.
When ESG first became popular, it tended to surround publicly traded companies. Now, ESG has trickled down to privately held businesses. Most convenience retailers are privately held, and ESG is impacting these companies in two ways, according to Jeff Hove, vice president of the Fuels Institute.
The first way is that if privately held companies are doing business with banks to gain access to capital or other reasons, banks want their ESG reports. Privately held companies are also finding that if they are involved in a merger or acquisition, they need to provide an ESG report to expose any potential risks to the buyer. For example, the buyer could ask for an environmental site assessment for potential ground contamination risks or financial risks.
Suppliers working with privately held customers also need an ESG report.
“If you’re in the supply chain and you are doing business with a publicly traded organization, they are going to want you, a privately held company, to have an ESG report so then they can take those metrics and that data and they can include it in their ESG report,” said Hove. “It’s a bit of a chain reaction with how ESG is rolling out between public and private.”
Hove says that he has not seen ESG demands on fuel purchasers from lenders; however, if a business owner is looking to build a new store from the ground up, then they are likely going to need to provide a report to banks. However, any business wanting to liquidate their assets and exit the business should have an ESG report regardless of size.
“I don’t care what size you are—you better be looking at this as a tool to help the valuation of your property, to help the process of the sale along, and it’s not all negative either. There are ways to really build in the positive messages of all of the things that this industry does,” said Hove. “These guys do a lot of good things for the community. Some of them have armies of store clerks that have been trained on recognizing human trafficking and criminal activities. That’s a message that we got to get out there. It’s a great message, so this is an opportunity for that as well.”
Scott and Hove have created an ESG reporting app that makes it easier for companies to track and improve their environmental, social and governance impacts.
“We built out this application with the guidance and the tools to create the report. Ryan refers to it as almost a TurboTax format where we can introduce new metrics and plug in all of our data and create the actual report. But it’s a fraction of the cost of what people are paying for it today,” said Hove.
Don’t miss the week’s episode of the Convenience Matters podcast to find out how ESG scores work and how Scott and Hove are working together to help convenience retailers improve their ESG metrics.
For more on ESG and how the investment community’s spotlight on ESG is creating a groundswell for retailers to establish benchmarks, read the NACS Magazine article “Challenge or Opportunity?” in the October 2021 issue.
Each week a new Convenience Matters episode is released. With more than 300 episodes to choose from, the podcast can be heard on Apple Podcasts, Spotify, Google Play and other podcast apps and YouTube and at www.conveniencematters.com. Episodes have been downloaded more than a quarter million times by listeners around the world.
Sara Counihan is contributing editor of NACS Daily and NACS Magazine. Contact her at firstname.lastname@example.org.