Do environmental, social, and governance (ESG) priorities compete with long-term value creation?
While some companies may be tempted to cut back on ESG initiatives in order to boost short-term earnings (just as with any other investment), managing exclusively for short-term earnings is antithetical to long-term value creation. For companies to earn and to continue to merit their social license—and, in turn, deliver value for their investors—they must meet the needs of a wide range of stakeholders; recognize environmental, social, and governance expectations; and understand how those expectations can shift. No organization can remain in business unless it follows law and ethical custom.
Today, the existential dangers of climate change and the need to reach net-zero emissions are clearly top of mind. But as we have shown for decades, forward-thinking companies have been addressing first-, second-, and third-order consequences of climate change, including existing or potential regulation, in a thoughtful, value-creating way.
This deliberative approach holds true as companies consider each of the ESG dimensions. When calibrated to the unique requirements of a distinct business model, ESG does not compete with long-term value creation. Rather, ESG can help unlock value, with positive effects for stakeholders, society, and the planet.
