Advantages of applying ESG for sustainable growth

Abstract

The Swedish company Oatly is Scandinavia’s leading brand of plant-based products. Since expanding to China in 2018, Oatly has faced increased demand and grew its global sales in 2019 by 88%. In connection with an increasing awareness of sustainability in society, the term ESG has emerged. Furthermore, when expanding business to China, it is critical to consider ESG based on the UN’s SDGs to sustain successful growth. Therefore, this report aims to understand how ESG can be applied, based on the UN’s SDGs, and how ESG creates value for companies in China. Based on these findings, the aim is to identify which major sustainability aspects Oatly should focus on along with expansion in China. This report is based on data collection through a literature review, the SWOT and PESTEL frameworks, and interviews with key people from Oatly. The literature review supplied the report with a comprehensive understanding of ESG, its connection with the UN’s SDGs, and its application to companies in China. Through the frameworks SWOT and PESTEL, the report identified key internal and external factors in connection with strategic thinking and decision-making. Qualitative data has been collected through interviews. This data was of high relevance for the understanding of Oatly and the company’s operations in China. By connecting the literature review, relevant frameworks, and interviews, the report could produce results, as well as create a proper opportunity for a deeper analysis. The report concluded that Oatly should consider ESG in the context of its expansion in China. Firstly, the application of ESG based on the UN’s SDGs was concluded to enable companies to identify important aspects related to sustainability, while sustaining transparency towards stakeholders. Secondly, by applying ESG metrics, companies in China can benefit from enhanced value creation. This value creation includes increased customer attractiveness and stakeholders’ willingness to invest in the company’s assets. Lastly, with ESG applied, it is clear that Oatly’s expansion to China has resulted in challenges regarding sustainability performance. Thus, to maintain its sustainability focus, it is critical for Oatly to evaluate ESG performance along with continued growth in China and apply relevant ESG metrics to strategies.