ESG is often linked to the Financial sphere, typically with reference to ESG ratings which are used to drive investment decisions.
We are strong proponent of ESG as a modern, practical, operational tool to measure the overall performance of a company.
Due to the breadth and depth of elements covered, (multiple topics within each main domain) ESG is a modern, “real world” management tool, it reflects real world concerns and realities.
When we measure the ESG performance of a company, we explore up to 360 indicators across 17 topics.
” That analysis give us a complete X-Ray of a company and is a great proxy for overall healthiness of an organisation. ”
Companies that perform well across all three domains of E, S and G are the ones best positioned to continue prospering in a way that is aligned with climate goals and societal dynamics. They have business models suited for these changes and are able to adapt. They are able to invest time and energy across each aspect. Great companies are healthy across the board, they are genuinely sustainable in the broadest, strategic sense: net zero environmental impact, positive societal impact, adaptable business model, flexible market offering and production capabilities, genuine connections with customers, supportive communities (local or virtual), limited reliance on certain types of debts etc.
Companies that do well on most aspects of ESG are generally healthy but their progress might be limited to some extent. Their long-term success is conditioned on maintaining their commitment to understanding and improving their positive impact on the Environment and Society, while maintaining a sound business model.
Finally, companies that generally do not perform well on most topics or those that perform truly badly in one of the domains are doomed to fail. They might already be failing but kept in motion by market inertia.
Their social license to operate is eroding fast. At a macro level they are not in sync with market dynamics, often exploiting a temporary, weak market or excessively strong market position (stifling competition, leadership with no innovation or participation in “at risk” industry such as oil & gas).
In the 21st century only companies that perform “great” across E, S and G will thrive.
Companies that have “good” ESG performance will endure, though with fragility and at risk of changes in market dynamic.
Companies with “weak” ESG are effectively stranded assets and unlikely to survive in the mid-term unless they take considerable measures to reshape themselves.
In the long term, only companies with great ESG survive.