The value that customers, shareholders, employees, and business partners place on environmental protection, diversity, equity, and ethics has led to the explosion of corporate investment in sustainable, inclusive business practices.
Global sustainable investment exceeds $30 trillion, according to McKinsey & Co., which represents a 68% increase since 2014 and a tenfold jump since 2004. Moreover, the consultancy says, corporations that proactively integrate the elements of their Environmental, Social & Governance (ESG) initiatives are strengthening and extending their position in customer, labor, and investment markets.
“Social criteria overlaps with environmental criteria and governance when companies seek to comply with environmental laws and broader concerns about sustainability,” according to its report, Five Ways that ESG Creates Value.
How Do Sustainability Practices Improve Business Operations?
ESG-committed corporations are finding opportunities to innovate processes and operations that cut costs, reduce risks, and engage supply-chain partners that are similarly invested in sustainability and protect their reputations.
For instance, in announcing its intention to invest $1 billion over 20 years on a broad range of sustainable climate initiatives, 3M intends to reduce water use in production operations by 25% and source renewable energy providers to completely power its global headquarters.
“We are proactively reviewing our manufacturing facilities, going plant by plant to make investments and updates that will go beyond what is required,” 3M Chairman and CEO Mike Roman told ESG Today. He added that the company would share its water-quality expertise with communities where it does business.
How Does Diversity, Equity, and Inclusion (DEI) Create Value?
Diversity, equity, and inclusion (DEI), the social component of ESG, has grown from a simple preference into a must in hiring, promotion, and other HR practices, as well as in relationships with communities and business partners.
DEI grew out of government-directed quotas and equal opportunity goals. DEI efforts now represent an organization’s commitment to ensuring a culture that values and honors employees’ diverse identities and proactively eliminates biases hidden in legacy policies and practices.
Citing research from various sources, staffing industry resource 15Five notes that corporations with proactive DEI policies:
- Outperform less diverse organizations
- Understand diverse markets better
- Create more value and profit when executive leadership is diverse and inclusive
15Five notes that a robust DEI program “fosters higher degrees of engagement, productivity, and innovation.”
How Does ESG Affect Business Partner Relationships?
ESG is an essential component of global regulatory compliance, investor confidence, competitive market advantages, and employee satisfaction. As a result, companies are expanding visibility up and down their supply chains to measure their partners’ commitment to environmental and social issues.
Sustainability certification supported by ESG reported data and disclosures is critical. Therefore, corporations must demonstrate their ESG proactivity to prospective customers while buyers take steps to protect themselves from regulatory action. Kodiak Rating says buyers require data confirming a seller’s commitment to and implementation of ESG policies to ensure they are working with partners in regulatory compliance.
“Collaboration with the wrong suppliers could lead to unethical supplier actions, such as feeding back faulty data sets to the purchasing entity,” according to the global supply chain consultancy.
What Does ESG Mean in Investment Markets?
Investment managers at Morgan Stanley say it uses a corporate commitment to integrated ESG compliance and reporting to identify investment opportunities.
Calling “ESG a component of quality,” the firm notes that a strong sustainability proposition may insulate it from “risk events” such as accounting scandals, industrial accidents, recalls, and ecological disasters.
“While there is no silver bullet to avoid such catastrophes, we believe that incorporating ESG analysis can mitigate these risks,” it reported in an Investment Insight.
How Does ESG Compliance Create Career Paths for MBA Graduates?
While nine out of 10 managers say their companies are committed to implementing sustainability policies, only two-thirds have strategies in place. According to Business Because, an independent B-school information service, “Since most companies are keen to hire talent that can support their social or sustainability goals, [MBA] graduates can expect to be snapped up by a wide range of employers.”
The Master of Business Administration (MBA) offered online by Barry University equips graduates for career success through a customizable curriculum that explores:
- A corporate management worldview
- Ethical practices that support social responsibility and environmental sustainability
- Diversity, equity, and inclusion challenges are changing business management
Graduates of the program will effectively drive sustainability and DEI practices in the business world.
Learn more about Barry University’s online MBA program.