It’s not just shoulder pads and high-powered business meetings, now success is defined by people, planet and profit
For many organisations the connection between social good and profit still remains tenuous. Is the organisation’s interest in the planet, better resource management and waste really going to change financial results? Will diversity and inclusion really shift the business into an era of improved growth? The answer is, unexpectedly for many, yes. The reason, however, is more complex.
From an investor perspective, ESG principles are becoming increasingly sought after as they not only improve investment returns but have the benefit of positively impacting on society. It’s not a PR exercise designed to make a company look good for the public. It’s a proven strategy that’s aligned with changes in stock market and investor strategy and is reflected in the launch of the S&P Dow Jones Indices’ S&P 500 ESG Index that excludes any organisation that doesn’t meet very specific ESG requirements.
The triple bottom line – a term developed by John Elkington – is a solid yardstick in measuring the true value of ESG and how it’s linked with profit. If an organisation is achieving its goals across Environmental, Social and Governance pillars, then it’s increasing its market footprint and the value that it delivers to investor, shareholder and customer. These pillars offer organisations an opportunity to change the ways in which they approach spend, people and business – ways that are not just socially more relevant and ethical, but that deliver tangible benefits to the bottom line.
That’s the profit element. Now, what about the people? If an organisation shows respect to its people and recognises the value that they bring to the business and its success, then it’s more likely to attract the kind of talent that will stay and be engaged with the business. This talent will probably be of a high calibre, bring impressive skills, and stay for longer. Companies that have high employee churn and unrealistic performance expectations are losing ground to those that treat people with respect. People matter, and organisations that believe this are increasingly benefitting from this point of view.
The next generation of customer and leader, the millennial, has drawn a clear line in the sand when it comes to investment, the companies they support and the businesses they engage with. From investment to purchase to work – this generation is choosing social benefit over profit and brand. This value shift can also be seen across older generations as more and more consumers vote with their feet, and their wallets. It can also be seen in how companies have faced plummeting results in the wake of bad behaviour. Just some examples include United Airlines, Equifax, Google, Nissan, Starbucks, and Facebook. Some have made huge efforts to redeem themselves, others have not, and the results speak for themselves – Facebook lost around 15 million users between 2017 and 2019, and its losing advertisers as a result of recent hate speech scandals.
It’s a clear indicator as to how profit and people and planet – the three pillars in the triple bottom line – are coming together to create a more holistic approach to business and sustainable success. ESG is not a box that’s ticked, it’s an ethos and an approach that can fundamentally alter how an organisation builds both its reputation and its financial success in a market defined by a need for sustainable change.