Marrying profit and purpose in the age of ESG

Financial gains cannot trump environmental concerns in the long run.

You probably think of Tesla as an EV manufacturer. But did you know that up until very recently, it didn’t rely on car sales to reach profitability — but on the selling of emissions credits to competitors?

This is just one example of how ESG is rewriting the rules of just about every industry — very likely including your own — to reflect the mindset of the 2020s instead of the 1970s. We are leaving the era of “profit at any price” behind and ushering in a new paradigm: capitalism with a conscience.

ESG is a battery of value-based metrics taking a broad array of “soft” factors into account, including sustainability and ethics.

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ESG will continue transform business in the coming decade — and how your organization can not only survive but thrive at the intersection of profit and purpose.

Water, for example, is rarely priced according to the actual supply available — it’s often underpriced. We don’t price greenhouse gas emissions — although we’re starting to see carbon taxes and emission-trading schemes, which is progress,” Dun & Bradstreet’s Head of ESG Product, Rochelle March, says.

In a Harvard-published report, Nobel laureate Oliver Hart and finance professor Luigi Zingales agree: “[S]hareholders care about more than just money. Many shareholders pay more for fair-trade coffee, or buy electric cars rather than cheaper gas guzzlers, because, using the current economic lingo, they are prosocial. They care, to at least some degree, about the health of society at large. Why would they not want the companies they invest in to behave similarly?”