Three groundbreaking studies by organisations such as the United Nations Global Compact and Goldman Sachs presented this year at the Global Compact Leaders Summit show that an increasing number of business leaders see corporate responsibility as a way to compete successfully and to build trust with stakeholders — and that sustainability front-runners in a range of industries can generate higher stock prices.
“The evidence is building that embedding universal principles and related environmental, social and governance policies into management practices and operations delivers long-term business value and is rewarded by markets,” said Georg Kell, executive director of the UN Global Compact. “Fundamentally, for companies and investors, this is about managing risks and opportunities presented by globalisation.”
A report released by Goldman Sachs, one of the world’s leading investment banks, showed that among six sectors covered — energy, mining, steel, food, beverages and media — companies that are considered leaders in implementing environmental, social and governance (ESG) policies to create sustained competitive advantage have outÂÂperformed the general stock market by 25% since August 2005. In addition, 72% of these companies have outperformed their peers over the same period.
Goldman Sachs analysed the companies with respect to three areas: ESG performance, how well they are positioned vis-à-vis long-term industry trends and the strength of their underlying financial returns.
At the summit, the UN Global Compact also released its first Annual Review, a comprehensive survey that monitors the extent to which companies have implemented the 10 Global Compact principles in the areas of human rights, labour, environment and anti-ÂÂcorruption. Key findings include:
- a majority of survey respondents have policies in place related to human rights, labour conditions, the environment and anti-corruption;
- 75% of respondents have engaged in cross-sector partnerships with one or more of the following sectors: NGOs, business, academia, the UN and other multi-ÂÂlateral organisations; and
- 63% of respondents said they participate in the Global Compact to increase trust in the company.
At the same time, there are important “performance gaps” in implementation, as highlighted by a complementary survey of chief executives participating in the Global Compact. The survey, prepared by McKinsey & Company, revealed the following:
- more than 90% of CEOs are doing more than they did five years ago to incorporate environmental, social and governance issues into strategy and operations;
- 72% of CEOs said that corporate responsibility should be embedded fully into strategy and operations, but only 50% think their firms actually do so; and
- 59% of CEOs said corporate responsibility should be embedded into global supply chains, but only 27% think they are doing so.
“Taken together, these three reports show that, for an increasing number of business leaders, corporate responsibility is no longer an option, it is a necessity in order to compete successfully,” said Kell. “At the same time, in order to fully maximise these benefits and increase their competitive advantage in the global marketplace, companies must adopt a broader and deeper approach with respect to implementation of corporate responsibility principles.”