Companies across America and around the world are waking up to the reality that their ability to achieve financial success is increasingly connected to realizing their environmental, social and governance commitment.
ESG refers to three central factors used to measure the sustainability and societal impact of an investment in a business.
- Environmental — Every company uses resources and affects, and is affected by, the environment.
- Social — Every company operates in a diverse society and must consider its relationship with and reputation in a community.
- Governance — Every company chooses structures, policies and procedures to operate within and govern itself.
Essentially, it’s the fabric of a company’s goals and values for just about everything society cares about today — diversity, equity, inclusion, social justice, climate change, energy use, environmental impact.
ESG is not a passing fad. Research firm Opimas estimates total spending on ESG data was $617 million in 2019, up from $505 million in 2018. It estimates the ESG data market could hit $1 billion this year1. The data is out there; the question is what to do with it.
The more your company can show its purpose in delivering value to its customers, its employees, and its communities, the better able you will be to compete and deliver long-term, durable profits for shareholders.
Larry Fink, Chairman and CEO, BlackRock
In advancing on ESG, business fundamentals should never be overlooked. Rather, they must be matched to purpose. That’s now achievable by using data-driven performance metrics to build and maintain real relationships with an audience. These same metrics can uncover what audiences value and who influences them, and guide how to effectively engage with them. It’s the only way to ensure you are driving profits to turn purpose into progress.
If being true to core values and resonating with your audience isn’t enough to begin the self-assessment, McKinsey & Co. outlines the five ways ESG affects the bottom line: facilitating top-line growth; reducing costs; minimizing regulatory and legal interventions; increasing employee productivity; and optimizing investment and capital expenditures. More simply put, as Brian Jones, Bravo’s senior adviser and former Fox Business Network president, notes, “values have value.”
