The abbreviation ‘ESG’ (environmental, social, and governance) was coined in 2005 as shorthand for a more responsible approach to doing business. Lately, the concept has been met increasingly with skepticism from critics who suggest that companies either can’t or shouldn’t bother to uphold ESG precepts.
McKinsey makes an affirmative case for ESG—laying out reasons to care about it and strategies to implement it effectively. Elsewhere, a conversation with a CDO (chief diversity, equity, and inclusion officer) focuses on methods for building a culture of representation.
Naysayers complain that ESG is a distraction for many companies, creating goals that are impossible to meet and effects that are impossible to measure. Senior partners Lucy Pérez, Vivian Hunt, Hamid Samandari at McKinsey offer rebuttals to those claims, asserting that ESG is now more essential, relevant, and quantifiable than ever before. Addressing ESG is imperative for companies that wish to demonstrate they deserve society’s trust.
For ESG to make a difference, it must be implemented in a rigorous, socially attuned manner. Having established the “why” of ESG, move to the “how”—practical steps for making ESG real. Among key components they recommend for an effective ESG strategy - benchmark regularly, think systematically about trade-offs, and let investors see how ESG meshes with the business model. To put in place a successful diversity, equity, and inclusion (DEI) strategy, a company must designate a DEI leader.
