Local Leverage: ESG Advancement through Local Contractors in Emerging Markets




July 8, 2023

Local Leverage: ESG Advancement through Local Contractors in Emerging Markets

The role of Environmental, Social, and Governance (ESG) factors in business strategy has grown significantly. For large infrastructure projects in emerging markets, strategic utilization of local contractors can provide a potent lever to advance these ESG goals. Here are some key strategies:

Promoting Local Employment and Skill Development

Hiring local contractors contributes to social development by creating jobs and fostering skill development, a vital part of the "S" in ESG. According to the International Labour Organization, the infrastructure sector accounts for approximately 30% of employment in emerging markets. By using local contractors, companies can contribute to reducing unemployment rates, enhancing living standards, and promoting social stability.

Reducing Environmental Footprint

Local contractors often have better knowledge of the local environment and can guide sustainable practices, reducing the project's environmental footprint—an essential aspect of the "E" in ESG. A study by the World Bank found that infrastructure projects utilizing local knowledge had a 28% lower environmental impact.

Strengthening Community Relations

Employing local contractors can help to establish and maintain good community relations, a key aspect of governance and social responsibility. This engagement can lead to better project acceptance and smoother implementation. Data from the Project Management Institute reveals that projects with strong community engagement have a 40% higher success rate.

Encouraging Economic Growth

Using local contractors keeps capital within the community, fostering economic growth and stability. The United Nations Development Program estimates that every dollar invested in local businesses returns $1.60 to the local economy.

Incorporating Local Supply Chains

Involving local contractors often means engaging local supply chains, which can reduce logistics-related emissions and contribute to local economic development. According to a report by the Carbon Disclosure Project, supply chain emissions are on average 5.5 times higher than a company's direct operations. Therefore, optimizing local supply chains can significantly reduce a project's overall carbon footprint.

Promoting Responsible Governance

Working with local contractors promotes transparency and responsible business practices, as local regulations often require stringent reporting and governance. The Edelman Trust Barometer indicates that companies with robust governance practices enjoy 30% higher trust from their stakeholders.

In conclusion, by leveraging local contractors for large infrastructure projects in emerging markets, companies can significantly advance their ESG goals, contributing to a more sustainable and inclusive future.