Green Credentials as a Selling Point: Can ESG Boost Valuation?

Article Author: Garry Stephensen
Position: Managing Director
Read time: 5 mins

As Australian business owners look to maximise the value of their enterprises ahead of a potential sale, a growing number are asking a timely question: Can environmental, social and governance (ESG) performance actually be a factor that boosts business valuation?

In a marketplace increasingly shaped by climate risk, investor expectations, and consumer consciousness, the answer is a resounding "yes" provided your ESG credentials are genuine, measurable and aligned with markets.

Green Credentials as a Selling Point: Can ESG Boost Valuation?

Why ESG Matters More Than Ever

In recent years, ESG factors have moved from the periphery of due diligence to a central consideration in many acquisition decisions. This is especially true in Australia, where regulatory pressure, climate awareness, and corporate responsibility are converging rapidly.

Key drivers behind the trend include:

Investor and buyer preferences: Private equity firms, institutional investors, and even many high-net-worth individuals are incorporating ESG screens into their acquisitions to future-proof their portfolios.
Consumer expectations: A growing segment of the Australian public (particularly younger consumers) prefer to buy from, work for, and support sustainable businesses.
Regulatory tailwinds: ASIC, APRA and the ASX Corporate Governance Council are increasingly focused on ESG disclosure, particularly climate-related financial risks.
Operational resilience: Businesses with strong ESG frameworks are often better positioned to manage environmental risks, attract talent, and reduce long-term liabilities.

ESG as a Value Driver
When it comes to business sales, ESG can influence valuation in several ways:

1. Brand Premium

Businesses with strong environmental credentials (such as carbon neutrality, sustainable supply chains, or circular economy initiatives) often command higher goodwill, especially in industries with high public visibility like food, fashion, tourism, and retail.

2. Cost of Capital

Buyers may see lower risk in businesses with strong governance and sustainable practices, translating into a lower required rate of return and a higher purchase price.

3. Broader Buyer Pool

Businesses that align with ESG principles can access a broader pool of buyers, including those with ESG mandates. This can create competitive tension during negotiations and increase valuation.

4. Regulatory Readiness

Companies that already comply with likely future regulations (e.g., emissions reporting, modern slavery laws, waste management) will require less remedial investment from a new owner.

What Buyers Look for in ESG

To be a value-add rather than a marketing gimmick, ESG credentials must be verifiable. Buyers (and their due diligence teams) will look for:

Documented policies and procedures (e.g., environmental management systems, ethical sourcing guidelines)
Data and measurement (carbon footprint, energy use, employee diversity stats)
Certifications or external validations (e.g., B Corp certification, ISO standards)
Track record (has the business acted on its ESG goals, or are they new window-dressing?)

ESG Across Industries

ESG may not hold equal weight in every industry, but its importance is growing across the board:

Hospitality and tourism: Eco-certified operators often benefit from customer loyalty and premium pricing.
Manufacturing and construction: Waste minimisation, emissions tracking, and safety records are under the microscope.
Agriculture: Sustainable land use and water management are increasingly key in buyer assessments.
Professional services: Governance, diversity, and ethical sourcing of suppliers are taking centre stage.

Case Study: Solar-Powered Manufacturing Business Secures Premium Sale Price

In 2023, a Queensland-based manufacturing business producing outdoor furniture was listed for sale. The company had invested early in ESG initiatives, including:

Installing a 100 kW rooftop solar system, reducing reliance on grid electricity by 65%
Sourcing all timber from FSC certified suppliers
Publishing a sustainability audit with audited Scope 1 and 2 emissions data
Establishing a recycling initiative for packaging and manufacturing waste

Although its earnings were on par with similar competitors, the business attracted multiple offers from private investors and a family office looking to diversify into sustainable enterprises. The final sale price was 18% higher than the average EBITDA multiple for comparable manufacturing businesses in the region. This represents a premium the buyers justified due to its "long-term operational resilience, ESG transparency, and strong brand position with eco conscious consumers."

Preparing for Sale: ESG Tips for Australian Business Owners

If you're considering selling your business in the next 12–36 months, consider these ESG-focused strategies:

Audit your current ESG practices and identify quick wins (e.g., energy efficiency upgrades, formalising policies).
Document your ESG efforts with tangible evidence (not just broad statements).
Seek third-party validation where practical (e.g., NABERS ratings, carbon-neutral certifications).
Tell your ESG story clearly in your Information Memorandum or business sale documents.
Work with a business broker who understands how to position ESG as a value lever, not just a footnote.

Green credentials are no longer just a "nice to have" . Rather, they are becoming a key valuation lever in Australian business sales. With investor, consumer, and regulatory pressures all aligning in favour of sustainable and well-governed companies, ESG performance can give your business a competitive edge and improve exit outcomes.

If you're planning to sell your business and want to understand how your ESG profile might influence buyer interest or price, a qualified business broker can help you benchmark your position and develop a strategy to enhance it ahead of going to market.