Per this Forbes article, top performers on ESG topics are rewarded with valuation multiples 3% to 19% higher than median performers. (Both are dramatically higher than companies without an ESG program.)
Further, the article stresses that to become a top performer and enjoy the higher multiples, a company needs to capture four essential mindset shifts.
It’s the CEO’s job.
Leadership on ESG topics is now an expectation of CEOs; when they relegate it to a function or delegate it down, they miss the opportunity to lead, and they hamper the organization’s ability to move boldly.
Profitable is scalable.
One of the most critical mindset shifts for leaders is to move away from the idea of ESG as altruism. If ESG is a cost center, there will always be pressure to manage it down. But when ESG shifts to be a profit pool, a scalability enabler, an innovation engine—that’s when its impact truly compounds.
If you’re not uncomfortable, you’re not doing it right.
Those with the courage to embrace the discomfort by rethinking their assumptions, tackling the intractable issues, telling their story even when it’s imperfect, and using their purpose as an edit point—those are the companies who will be well-tuned to thrive in the era of shareholder capitalism.
It’s about cooperation, not just competition.
Pursuing ESG is in a company’s competitive self-interest, as capital and talent increasingly flow from ESG laggards to ESG leaders and scarce sustainable sources get locked up. But visionary leaders understand that the crises we face are collective; they see both the imperative and the opportunity for cooperation and consider how they can move the full industry ecosystem by convening as well as competing.
When you’re ready to commit, commercialize, get uncomfortable, and cooperate, there are four steps that will help you chart a path toward Authentic ESG. For a fuller discussion of these four steps see the article “Authentic ESG: From Compliance to Calling.”
- Start with purpose. Purpose is your “why,” your reason for being. A clear and compelling purpose not only helps you hone in on an ESG agenda that is credible and authentic, it provides the inspiration and alignment needed to transform your organization through an ESG lens.
- Take a stand. A robust ESG agenda will cover a range of topics across environment, social, and governance issues, but within that fulsome agenda there is merit in taking a spiky approach. What is the one thing that you want to be known for, that you want to move the needle on in an industry-shaping and society-shifting kind of way?
- Embody the change. Create congruence between the commitments you’re making to the world and the decisions being made in your four walls, by taking a thoughtful approach to educating, inspiring, and mobilizing your organization around your ESG transformation.
- Tell your story. In addition to a bold and clear-eyed ESG strategy, you need a compelling and distinctive ESG story—a strategic narrative from which all ESG-related communications flow, a thorough understanding of which messages matter most to which stakeholders, and resonant, breakthrough creative work. If you fail to tell your story well, you miss the opportunity to attract capital, attract talent, attract customers, build trust with partners and regulators, and inspire advocacy.
Edenark Group, with the world’s top environmental sustainability, carbon neutral and ESG planning program, is here to help you turn ESG into a competitive edge and maximize your company valuation.