Companies with ESG priorities outperform competitors - report
With an average of 11% increase in revenue annually, these companies’ revenue growth was 1.4% points higher than those who lagged on ESG.
Companies whose executives pursued strategies that involve environmental, social, and corporate governance (ESG) priorities despite major shifts like the COVID-19 pandemic, geopolitical tensions, and climate concerns have outperformed their peers, a study by McKinsey Institute revealed.
Whilst these companies have also done better over their counterparts across other significant areas, it is still important to note that they have also performed better in terms of ESG, as this is also a key priority in their strategies.
Including ESG goals in companies’ targets might be a little challenging in the presence of a tight budget. At these times, priorities can be sustaining the capital or increasing sales. However, research shows that peak profits and growth performance can only be achieved if growth revenues are partnered with improving ESG.
Companies can continuously stand out in terms of growth if their transformation towards sustainability will remain resilient across the whole enterprise. This means that even when funding may be scarce, or economic outlooks cannot be predicted outright, business executives should have the courage to stick to the working strategies, including exerting efforts for ESG. Research shows that they should have a “through-cycle” mindset - a vision and commitment for growth coupled with proactive actions towards achieving this.
Adopting the right mindset and supporting it with the right strategy is a choice. A leader’s mindset should include being rewarded by the market for being sustainable while gaining profits. In time, products of ESG efforts will create outsize returns that will be reflected in their financial performance.
These efforts must not be merely side initiatives, but strategies that are integrated into the company’s core thrust. And whilst monitoring and measurement of ESG still change over time, it is clear that actions from both the private sector and regulating bodies are needed immediately. Leaders should commit, and financial returns will follow.