The three critical factors when choosing an ESG provider

Here’s a note from Nawar Alsaddi:

This is probably one of the most important, if not the most important, chart for any ESG solutions company. According to a Reuters survey of 3000 sustainability professionals around the world, solution cost (upfront, ongoing, and resourcing) is the most important variable in choosing an ESG solution provider, with 62% highlighting cost in their top 3 considerations for supplier consideration.

Looking at this chart, one may conclude that lowering your solution price will be a sure recipe for success. This would be the wrong approach and so for the following reasons:

1. Cost is what you pay, value is what you get. It is important to understand the value you bring to the client prior to playing around with solution’s price. If you can effectively demonstrate your value proposition, cost/price will be a lesser issue since cost is contingent on the value provided. This is not always obvious to the client, it is YOUR JOB to articulate this relationship.

2. An important part of cost is the quantity of resources the company needs to devote to the solution, and how much these resources cost. According to the same report, for Scope 1-3 reporting with assurance, 33% of companies have under 10 employees involved in the process, another 33% of companies have between 11 and 50 people involved, 15% between 51 and 100, 17% between 101 and 1000, and 3% over a 1000 people. The weighted average is 161 employees. This is a LARGE number. As such, streamlining these employees interactions with your solution materially lowers your product total cost.

3. The second and third factors on the list, compatibility and customization are extremely important, and they ultimately link back to cost. Namely, if the solution is compatible with existing systems and highly customizable, this means the client will get far more out of it. As such, by meeting number 2 and 3, you will be solving to a large extent for the first obstacle, cost.

Balancing between these three factors is critically important as you think about your plan to out compete your competition and win market share. It’s easy to slash prices by 50%, but much harder to create value that slashes the cost by 50% without touching the price. Maximizing profitability and winning over the long term entails more of the latter and less of the former. See this Reuters report.