It is becoming increasingly essential for companies to understand and address the effects that externalities can have on their social license. The latest McKinsey Global Survey on environmental, social, and governance (ESG) issues asked more than 1,100 respondents in more than 90 countries how their organizations are rising to this challenge.
Survey respondents who report that their organizations have both created financial value and increased broader impact from ESG—the two conditions for what we call “ESG momentum” – point to seven organizational traits.
- First, their organizations approach ESG from a growth perspective. The organization’s priorities, respondents report, exceed merely conforming to industry standards or regulatory requirements and aim toward unlocking new opportunities.
- Second, they report that their organizations strive to connect with external stakeholders and to be accountable to them.
- Third, they identify specific stakeholder priorities for which their organizations are uniquely placed to excel; respondents say, further, that their organizations strive to make these priorities a core part of their business strategy.
- Fourth, respondents say their organizations empower a specific executive in the C-suite to work with the CEO in defining and achieving ESG ambitions.
- Fifth, their organizations build a central ESG team—which is not the same as building a large team. Respondents also say their organizations bring together talent from across the organization to help meet ESG goals.
- Sixth, their organizations make considered efforts to embed purpose into multiple aspects of their business.
- Seventh, their organizations tie ESG metrics to compensation, using KPIs to gauge progress on ESG objectives.
More information on the last organizational trait can be found here.
All told, survey respondents who identify their organizations as leading in ESG see their efforts as a means of both protecting and creating value.
