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06/12/2013

At the Corner of Citizenship and Commerce

A new era for core business interest in environmental, social, and government issues

A hallmark of a new era is challenging longstanding and commonly-held conventions. It’s heartening that the historical perspective of tackling environmental, social, and government (ESG) issues as “nice-to-do-but-not-essential,” has all but evaporated among many cutting-edge organizations.  Businesses today understand that ESG issues can be vital to their success and that new perspectives on ESG issues are driving innovative solutions in key business areas.  A recent Deloitte survey, for example, found that two-thirds of global CFOs expect their role in ESG-related strategies to increase over the next two years.  And, in another survey, the number of S&P 500 companies issuing sustainability reports jumped from 19 percent in 2010 to 53 percent in 2011—and this trend is expected to keep rising.

These findings lead us to conclude that being a “responsible enterprise” is increasingly viewed as a smart business practice.  In short, it’s where citizenship and commerce meet.

Today’s leading enterprises are addressing ESG issues head-on because they see both the tangible and intangible value of integrating actions associated with good citizenship and sustainability into core business activities.  One survey involving 250 senior business executives, revealed three major drivers of their companies’ ESG efforts (the number indicates the percentage of respondents who identified each of these three as either very important or important: 1) 81% - bolster corporate reputation and brand; 2) 78% - mitigate increased regulatory scrutiny; and 3) 80% - meet higher community and public expectations.  Also noteworthy was that the larger the company, the greater the forecast for impact.  And this makes sense when considering that such companies (e.g., $10 billion+ revenue) operate across a broad range of industries and geographies where social and environmental issues are most acute and/or visible.

Clearly, a new era of accelerated interest in ESG has arrived—welcome!--and is stimulating dialogue about how ESG values can both inform the organization’s core mission and strategies and enrich the company’s culture. A LinkedIn poll conducted in late 2012/early 2013 with management and C-suite executives at companies with more than 5,000 employees showed that many responding organizations are transforming their cultures to more strongly reflect ESG values and align them with their core mission and strategies in the following ways:

  • Actively measuring and mitigating ESG-related risks and improving transparency;
  • Using advanced analytics to improve reporting, perceptions, and management of environmental and social risks; and,
  • Aligning their business models with environmental and social goals and their performance management systems with desired outcomes.

Not only have we entered a new era, companies that treat ESG issues merely as compliance or PR levers may be missing a significant opportunity to be rewarded for the good work they do.  And there can be big payoffs in marketplace perception and the benefits that can be traced back to that.  Deloitte’s research, for instance, indicates that leaders on ESG issues are over 400 percent more likely to be considered leaders in innovation.


Cathy Benko
Vice Chairman

Deloitte LLP

Chris Park
Principal

Deloitte Consulting LLP

 

Sources:
Deloitte Dbriefs presentation, “The Responsible Enterprise: At the intersection of commerce and corporate citizenship
DUPress.com, “The Responsible Enterprise: Where citizenship and commerce meet” , http://dupress.com/articles/the-responsible-enterprise/?id=us:el:dc:dup263:read:cons

As used in this document, "Deloitte" means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making
any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

Copyright © 2013 Deloitte Development LLC. All rights reserved.

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