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Is ESG a drag on business performance?

According to an April 2023 report from IBM, a strategic approach to ESG does not drag on business performance: in fact, a properly structured and strategic approach to ESG delivers higher revenue, improved profitability, and deeper customer engagement.

This was the somewhat surprising conclusion after analysing 2 surveys; one surveyed more than 20,000 consumers across 34 countries, and the second survey asked 2,500 executives across 22 industries.

Contrary to popular opinion ESG and profitability are bedfellows, not enemies.  Top-performing companies don’t make trade-offs between sustainability, social responsibility, good governance, and shareholder value; they all work together.

One key aspect that the report highlights across the board is the requirement that companies, and in particular the board, view ESG as a vehicle for driving revenue, rather than just a reporting exercise. All stakeholders need to view ESG as a transparency enabler, something greater than the individual components of environment, social, and governance.

Transparency is essential for shareholders, consumers, employees, and business partners to truly believe a company’s claims until they have been verified.

ESG offers evidence and insights that opens the door to new opportunities and insights which can then be converted into greater business value through utilisation of relevant t data in operations for performance improvement or by engaging with customers and stakeholders to drive transformational growth.

Organisations must funnel data in two directions. Looking internally, they must embed ESG data into operations to drive performance improvements. Sharing transparent insights with others can help organizations strengthen relationships as well. It can build trust with customers, employees, and partners, create new market opportunities, and support innovation and engagement

Secondly, organisations showcasing successes in gender diversity and parity has been proven by recent IBV research to provide a 19% higher rate of revenue growth than similar organisations in the same industry.

In today’s world of misinformation, fake information and greenwashing, transparency is critical for shareholders, consumers, employees and business partners – not to mention potential investors and, increasingly, regulators.

Carpe Diem – ESG is not only increasingly critical, but essential!