In the past decade, ESG has become wholly mainstream.
In 2005, the United Nations issued a report titled “A legal framework for the integration of environmental, social and governance issues into institutional investment,” which has been credited with launching the ESG movement.
Since then, ESG investing has evolved into a $35 trillion industry.
Many large corporations are fully on board. Amazon has pledged to go carbon-neutral by 2040, Apple by 2030, and Bank of America has pledged a trillion dollars toward sustainability by 2030.
But all this begs the question: Is an ESG proposition just another box to check for investor relations, or can an ESG proposition drive growth?
Our answer is that an ESG proposition can be a powerful tool for growth, so long as it’s well-conceived and well-executed.
Here’s how.
01.
Build (or Destroy) Trust
Trust makes it easier to do business. If consumers trust you, they’ll be more likely to believe the claims you make about your products and services. If partners and vendors trust you, they’ll be more eager to work with you. If governments trust you, they’ll be more willing to let you operate with fewer restrictions and offer easier opportunities for new markets. If your employees trust you, you’ll have a far easier time recruiting and retaining a qualified workforce.
But, your company’s ESG proposition doesn’t automatically build trust. It can do just the opposite.
The difference comes from authenticity.
If customers, partners, governments, and employees find your ESG proposition to be authentic, it’ll build trust. If they find it to be inauthentic, it will erode trust.
So, when you’re developing your ESG proposition, use authenticity as its foundation. Identify your company’s true core values: what makes you unique, what compels you.
Once you’ve identified those, you can create an ESG proposition that builds trust, and leverage that trust for growth.
02
Create a Happier and More Productive Workforce
Growth thrives on employee talent, satisfaction, and productivity. A good, authentic ESG proposition can help to build all three.
A 2022 Gallup poll found that nearly half of all employees rank a “diverse and inclusive” workplace as a top priority in what they’re looking for from an employer. Recent studies have also found that employees are motivated by the positive societal impact of the work they’re doing.
If your ESG proposition is authentic and made visible to your current and potential employees, it can strongly contribute to a better, more productive and satisfied workforce that drives growth.
03
Get Easier Access to Capital
There is, so far as we know, no mechanism for targeting investments towards “bad” companies. But there are plenty of examples of individual investors, venture capitalists, and institutions targeting “good” companies to invest in.
We already mentioned ESG-focused investment funds and Bank of America’s $1-trillion commitment to sustainable companies, but those are just a part of a very large opportunity.
A McKinsey review of research suggests that better ESG scores translate to about a 10% reduction in the cost of capital. On a hypothetical loan at 5% for a 5-year term, that’d result in about a $13,000 of savings for every $1 million borrowed.
Any time your company is looking for access to capital, a strong ESG proposition will be an asset in that search. And, easier access to capital can be a powerful driver for growth.
04
Reduce Costs
It’s easy to think of ESG propositions as cost centers: investments that we make in making our companies and our planet a better place.
But, the truth is that initiatives founded in an ESG proposition can deliver significant cost savings.
Energy efficiency is an example that can apply to nearly any company. Energy savings reduce a company’s carbon footprint at the same time as they reduce its utility costs.
Other solutions will be more company-specific. FedEx, for example, is planning to convert its entire delivery vehicle fleet to electric or hybrid vehicles. So far, the company’s converted about 20% of its fleet. That’s resulting in fuel-consumption reductions of over 50 million gallons. The carrier’s efforts toward more efficient aircraft have delivered even more impressive savings: 1.43 billion gallons of jet fuel since 2012. At current prices, those cost savings alone are worth about $5 billion.
All Together Now
What if a single initiative could make your customers and partners trust you more, make it easier to recruit and retain great employees, make it 10% easier for you to get capital, and cut costs in key areas?
A good ESG proposition can do all those things. And you would, in our opinion, likely be smart to invest in a strong ESG proposition for your company.
Speaking of Compelling ESG Propositions
At Echo-Factory, we’re driven by helping our clients create growth, and we believe that well-done ESG propositions can do exactly that. Recently, we had the opportunity to work on a couple ESG-relevant projects.
Unifrax and Lydall were companies with a strong ESG story to tell. When they came together and we helped them create their new brand, Alkegen, we made sure that story was front-and-center. While many companies pay lip service to sustainability, at Alkegen, it’s at the core of their business model, with products that reduce emissions, improve batteries, and “enable the world to breathe easier, live greener, and go further than ever before.”
We’ve also been working with our partners at Huntington Health to develop campaigns that are focused on the diversity of the community they serve, and the dedicated professionals who make up their community of caregivers.
In both cases, these ESG-related marketing projects are effective because they’re authentic. Alkegen really is a company whose products make a tangible positive difference to the environment every day. Huntington really is an organization that serves, employs, and welcomes an incredibly diverse population.
At the end of the day, the most effective ESG propositions are going to be the most true ESG propositions.
If you’re facing challenges with developing or communicating your ESG program to internal or external audiences, we’d love to talk.
