At their essence, the metrics are designed to help guide the business community’s transition from a primary focus on short-term, quarter-to-quarter financial performance toward a broader focus on long-term value across human, consumer, societal and financial outcomes. Ultimately, they provide a tangible way for companies to better serve their communities and become engines of broad-based prosperity.
That’s good for society, but it’s also good for our companies. There’s growing evidence focusing on long-term value creation is not only the ‘right’ thing to do – it makes sound financial sense. Recent research by JUST Capital revealed companies going ‘above and beyond’ to support their workforces during 2020 outperformed the market.
Sustainable value creation
The good news is, so far, there’s buy-in for the stakeholder capitalism movement at all levels: C-suites and boards know it’s important to ask strategic questions and forge a better path forward, and employees and consumers are demanding they do so. And investors are putting money where the strategy is: Assets invested in ESG funds are expanding rapidly and companies aligned to delivering long-term value enjoy lower costs of capital.
So, how does ESG disclosure fit into a business leader’s overall long-term strategy? The WEF-IBC project has called on the participation of experts from different functions within organizations – including the CEO, Chief Sustainability Officer, Chief Financial Officer, Chief Risk Officer and Chief Strategy Officer – a sign ESG disclosure is core to overall strategy, not marginal. Importantly, even if the disclosures are the correct first step, these functions should spend some time taking a fresh look at how the company delivers value across their workforce, customers, society and shareholders.
Each area has an important role to play, and the integration of ESG into corporate strategy presents an opportunity to drive differentiation in how your company delivers long-term value across stakeholders.