ESG principles add $4 trillion to the bottom line

Businesses that placed greater emphasis on environmental, social and governance (ESG) issues over the past three years will have seen revenues grow by almost ten per cent – or more than double the revenue growth experienced by organisations that placed less emphasis on the principles.

Similarly, their profits grew at a rate that was almost three times greater than the laggards.

These outperformance claims emerge in a new report, The $4 trillion ESG dividend, commissioned by global accountancy firm Moore, in which the Centre for Business and Economic Research (CEBR) investigated the rate of adoption of ESG principles and the bottom-line benefits at 1,262 large* firms across Europe, Australia and North America.

Indeed, the CEBR reckons that if all the companies surveyed had been equally committed to ESG, their combined revenues would have grown by 27 per cent over the three years to $4 trillion – or $45 million apiece.

Other benefits were noticed by those companies placing greater importance on ESG principles: 83 per cent reported improved customer retention (or a whopping 89 per cent for retailers), while 84 per cent noticed that their ability to attract external investment had improved either ‘slightly’ or ‘significantly’. There were other halo effects. Staff retention and recruitment benefited while 86 per cent perceived an improvement in their brand’s image. On the downside, most companies mentioned the cost involved in embracing ESG.

But the report also makes clear that not all businesses weight each element of ESG the same. In fact, it is British businesses who are most likely to judge all three parts – environmental, social and governance – as equally important, whereas fewer than 20 per cent of European business leaders share that view.

Interestingly, part of the costs associated with implementing ESG arise from staffing. While most firms surveyed (94 per cent) have dedicated ESG personnel, others were happy to task either their boards and management teams with promoting the issue or to dump it on HR or finance. There is obviously a chance for comms to land grab within those organisations, because the report warns this lack of specialist focus ‘may prove an issue in the future’ as the ‘potential returns on ESG investment are so significant’.

*Defined as companies that employ more than 250 people.