Last August, CEOs from 181 of the world’s largest companies declared that the purpose of a corporation is “to create value for all our stakeholders” – a notable departure from the shareholder-centric corporate philosophies of the past few decades. However, a recent study financed by the Ford Foundation found that these Business Roundtable signatories performed no better than their non-signatory counterparts on key social and human capital indicators this year. At Boster Group, we believe that corporations can unlock the potential of their corporate purpose through partnerships that achieve actionable and measurable environmental, social and governance (ESG) impact.
To explore why and how corporate purpose becomes more than a buzzword, Boster Group’s Founder and CEO Susan Boster led a CognitionX roundtable last week entitled “Purpose and ESG: Walking the walk or talking the talk?”. Susan was joined by Anne Marie Verstraeten, UK Country Head of BNP Paribas Group (in the top performing quartile of the above study), and Chuka Umunna, Executive Director and Head of ESG at Edelman. The trio agreed that Purpose communicates who you are as a company and your stated role in society; ESG is the action – the data and metrics used to keep track of the company’s actual impact in that role. As Chuka articulated, “ESG provides the answer to the question, ‘Where’s the beef behind your purpose?’”
Articulating corporate purpose in the context of ESG objectives has never been more important. Anne Marie highlighted that the pandemic has underscored the importance of purpose and accelerated the implementation of ESG criteria at all levels across the corporate world. Companies are waking up to Chuka’s belief that business and society are mutually dependent. He noted that the demography of today’s investor is different from a decade ago. This younger generation makes fundamentally different demands, moving away from the anachronistic ‘money for money’s sake’ and towards ‘money for a return that will do good’. Edelman’s Institutional Investors Special Report, published last month, revealed that investor prioritisation of ESG will only increase as we recover from COVID-19, and for good reason. Recent Morningstar analysis found that 25 out of 26 ESG index funds outperformed conventional counterparts for the year to date. The trend is positive and the Financial Times reports that roughly one out of three dollars invested in the US (or $17.1 tn) has a sustainable mandate. But there is more work to be done, and Chuka explained: “Unless ESG is seen to deliver better returns and outperformance, we won’t see the fund flows into it that we need to address society’s problems.”
The panel discussion combined Boster Group’s 20 years of experience with Anne Marie’s and Chuka’s expertise and lead to three key takeaways for how global leaders can truly walk the walk of their corporate purpose:
According to Anne Marie, purpose must be applied across everything a company does to have real value. BNP Paribas has incorporated ESG factors into its strategy since 2011 and aligned its commitment to society with the United Nations’ Sustainable Development Goals (SDGs). They have made tough decisions to phase out lending to the tobacco sector and adopt an exit strategy for thermal coal, forgoing revenues in the short term. As a leader in sustainable finance, BNP Paribas continues to integrate science-based targets into sustainability-linked loans for companies like Tesco. The group has also implemented a Corporate Sustainability and Incentive Scheme whereby 20% of the variable compensation of 5,000 top managers relies on 9 Corporate Social Responsibility (CSR) performance indicators. The success of BNP Paribas embedding purpose into its core business activities has been increasingly recognised by raters and rankers of sustainability performance, as evidenced by its inclusion in the Dow Jones Sustainability Index and its place in the top 7% ranking by the SAM Corporate Sustainability Assessment, issued by S&P Global.
2. Transparency is key. If companies are to deliver on their purpose in a recognisable way they must set clear goals and targets for which they can be held accountable. Measuring progress towards these goals and effectively communicating impact with stakeholders is paramount, and forms a core aspect of Boster Group’s client work. Anne Marie stated with conviction that “It always comes back to transparency. What you can’t see, you can’t understand, and certainly you can’t measure.”
Developing systems for ESG data collection is key, especially to meet the growing demands of investors, who place a premium on transparency. As companies determine what to count and share with their stakeholders, they must keep abreast of the ever-evolving guidance from regulators and standard setters. Initiatives like the EU taxonomy and the Task Force on Climate-related Financial Disclosures (TCFD) are creating important alignment in ESG disclosure through common frameworks and guidance; however, Chuka emphasised, we need a greater degree of consolidation. Working toward one repository for ESG standards, he argued, will make it easier for a wider array of companies to meet them.
3. Partnerships maximise ESG impact. Effective partnerships unlock larger-scale, more sustainable ESG impact. Anne Marie shared how BNP Paribas’ partnerships have been essential in navigating the COVID-19 pandemic. By collaborating with multilateral organisations, non-governmental organisations (NGOs), and science and industry partners, BNP Paribas has been able to deliver on its purpose throughout the crisis, directing £1 million of relief and support where it was needed most across the UK.
Partnerships also affect the pace at which we can tackle these complex issues. Anne Marie emphasised throughout that there has been an acceleration of capital allocation towards sustainable investing and interest in social impact, and business leaders must act quickly to respond. In her closing statement, Susan Boster reminded us that UN SDG 17 ‘Partnerships for the Goals’ is fundamental to driving forward conversation and action around ESG, purpose and the other SDGs.
With smart investments and collaborations, corporate purpose can become the engine behind sustainable, scalable ESG impact. Global leaders can demonstrate their purpose most efficiently and sustainably by engaging partners across sectors and within their own industries to achieve common goals for our planet and society. Boster Group works to identify opportunities that create shared value for all stakeholders, augmenting and scaling each organisation’s key value offering, in order to achieve measurable impact and sustained purpose. In partnership with other global firms and industry leaders with demonstrable commitment to tackling ESG issues – like Anne Marie and Chuka – these efforts will catalyse greater impact and value than ever before.
Interested in hearing more? Watch the full conversation as it happened here.