Protecting profit and the planet
While many companies want to do the right thing by becoming more sustainable, they also want their efforts to deliver real financial value. In the current challenging times, it can be tempting to see sustainability policies as a cost rather than a means to add value and, therefore, something that can be cut back.
CSOs, along with their chief executives, have a role to play in explaining how profit and purpose can be complementary – environmentally-conscious companies do not just protect the planet, they protect financial performance too.
Shareholder support for an ESG focus
One stakeholder group is certainly convinced of the link between ESG performance and financial success. Larry Fink, CEO of asset management company BlackRock, recently told Bloomberg that investors are shifting to ESG-focused firms and “the best companies with those factors … are outperforming their peers.”
In the end, shareholders are likely to drive companies to care about ESG whether they like it or not. And there is increasingly no place to hide. The 2020 EY Institutional Investor Survey found that, of the 98% of investors surveyed who assess ESG, 72% carry out a structured review of ESG performance, compared with just 32% two years earlier. Moreover, many of those who currently use an informal approach, plan to move to a more rigorous regime (39%).
The move to value-led sustainability
What we are currently seeing is a shift to sustainability becoming part of a value-based narrative. CSOs and their C-suite colleagues can facilitate this transition to value-led sustainability (VLS), turning ESG into a business, as well as a moral, imperative. Companies that are successful in this transition may increase their earnings, and therefore their total value, as a result of becoming more sustainable.
There are three key questions:
- Is sustainability embedded within the organization’s strategy and is there a business plan to support this?
- Is sustainability seen as an opportunity to find new customers, and increase revenue and market share?
- Has the organization clearly articulated the value of sustainability to internal and external stakeholders?