Insights from Financial Profiles in CFO Magazine: “ESG is Now Table Stakes – Is Your Company Still on the Sidelines?”

By Moira Conlon and Leigh Ann Johnston for CFO Magazine

We often say today’s best practices are tomorrow’s requirements.  Environmental, social, and governance (ESG) initiatives are no exception. Today, most large-cap leaders have well-established ESG programs and are evolving their approach and finding new ways to attract sustainability-focused investors. At the same time, many mid- and small-cap companies struggle with how to even begin to organize their ESG journey. 

ESG is a complex and far-reaching topic. And often, when you peel back the onion, you end up with more questions than answers. For newcomers to the ESG game, we find it’s often most helpful to start with what ESG isn’t. ESG is not philanthropy, a sales pitch, a program of the month, a one-and-done, or your paper cup recycling program at work. It’s also not something that applies only to companies that are doing something good for the planet or household names that are highly visible to consumers. Perhaps most importantly, it’s not something that is only relevant to companies of a certain size or in a certain industry.

Put simply, ESG is a set of factors that position a company to create long-term, sustainable value for all stakeholders, and can be used by institutional investors in making investment and voting decisions.

ESG has been around for a long time. What is new, however, is the recently accelerated adoption of widespread reporting on ESG principles and practices. This is due to the confluence of many factors, including the shift to passive investing, COVID, social injustice issues, the Great Resignation and talent shortage, and the transition of power, money, and jobs from the baby boomers to millennials and Gen Z.