ESG set to dominate business scene

Heather Hallam (BDO Managing Partner) and Michael Nes (BDO Business Advisory Manager) see a number of trends on the horizon for businesses.

Some have been around for some time but will make a deeper impact in 2023 such as ESG (environmental, social and governance) which will have flow through businesses on a number of fronts.

“ESG (environmental, social and governance) has very quickly become one of the most pressing factors facing business today,” says Heather.

Consumers now expect businesses to be acting on ESG, while businesses pitching for new projects or work are frequently being asked what their ESG credentials are. Organisations who embrace sustainability elements as part of their business plan stand to gain a competitive advantage, while those who are lax will see their bottom line suffer.

“Just as consumers expect businesses to act on ESG, so too do employees. New Zealand is increasingly stretched for available talent, taking meaningful action on sustainability could be the difference between hiring the perfect candidate and not hiring anyone at all. In such a competitive market, the small key organisational differences, become the big things!

“We see this as an area that is likely to face more regulation and businesses should be encouraged to proactively look into these factors to minimise future impact.”

Michael says with recent global events, obtaining goods from overseas countries has become more challenging, with lead times exceeding those seen previously. This has caused businesses to analyse their supply chains to ensure they are able to maintain business continuity and minimising inventory shortfalls. Furthermore, Cyber attacks on supply chains are a new risk that businesses are becoming more aware of, particularly where goods are manufactured on a computer controlled robotic production line that is at risk of a security breach, he says.

Businesses are combating these risks by creating full alternative supply chains, allowing for a backup to be implemented if the main supply chain is disrupted.

“We are not immune to these issues and a lot of our local businesses across a variety of industries rely on European or Asian channels to source their materials, and these are becoming a lot more competitive following the sanctions on Russia, war in Ukraine and China’s zero Covid policy all of which are disrupting supply channels.

“Businesses could look to work collaboratively to strengthen bids for alternative supply options,” Michael says. Heather says with a recession predicted for 2023, businesses need to more frequently review financial results to ensure margins are maintained.

“The key to managing through a recession is to keep an eye on your financial results, not just annually, but monthly, or weekly if possible to identify areas where cost cutting may be necessary or to determine sales prices are fixed at an appropriate level. “