Private (and closely held) companies have generally not been required to provide climate disclosures. Investor and regulatory scrutiny has traditionally been reserved for large, publicly traded companies. But new laws, more engaged stakeholders, and an emphasis on value chains has put private companies in the climate spotlight. Yet the demand for regulation often comes from the customers and investors of private companies – people with a stake in the outcome of the business.
Adherence to these regulations can hold genuine business value, and there are good reasons private companies should be proactive about ESG reporting. Some of the potential benefits include:
Improved public reputation. A positive corporate reputation can be difficult to earn, and there are many examples in recent years of how easily it can be lost. Showing transparency and a measurable commitment to sustainable progress can go a long way toward earning goodwill and building the public’s trust.
Building important strategic relationships, early. ESG reporting often requires outside experience to implement correctly, and such guidance will likely become even more important as newer regulations come into play. Establishing strategic business relationships early can help make your reporting process easier and more robust over the long term.
Being more attractive to public investors. If you have ambitions to start the IPO process or access public markets, being proactively transparent about your ESG initiatives can make you more attractive to investors. Many investors already include ESG data requests as a part of their due diligence, and companies that can readily show information on their endeavors may be better positioned to win investment.
