Firms encouraged to embrace ESG to help generate trillion-pound global uplift

If all companies in eight major economies including the UK adopted ESG (environmental, social and governance) principles at the same level, their collective sales would grow by more than a quarter to an estimated $4 trillion (£3.5tn), according to research by Moore Global.

The global accounting, audit, and advisory network, present in Scotland via accountancy firm Johnston Carmichael, which joined in in 2021, commissioned the Centre of Economics and Business Research to carry out the study, which polled 1,262 companies with at least 250 staff from across the US, Australia, Germany, France, Italy, Spain and the Netherlands as well as the UK.

It also found that those focusing on ESG have enjoyed higher revenues, stronger profits growth, better customer-retention and greater access to finance. Specifically, such firms prioritising this area over the last three years have been found to be growing sales at twice the rate of those that are not as committed, with revenues increasing almost 10 per cent in that time.

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Additionally, profits for keen ESG-adopters have risen three times faster than by those less keen, Moore Global said, while 83 per cent of proponents reported improved customer-retention, and about the same proportion reported that such practices improved their ability to attract external investment.

The companies in the survey, classed as the “engine room of the global economy”, are described as substantial enterprises but not typically on the stock market. These mid-tier companies have been placing greater importance on ESG since just before the emergence of Covid-19, and seen their revenues pick up by $3.1tn, Moore Global also said.

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Headcount for ESG-focused firms has grown 11 per cent since 2019, compare with 6.5 per cent for other businesses, and 86 per cent of companies adopting such practices also noticed greater positive reactions to their brand from customers, the study revealed. Furthermore, UK businesses were the most likely to judge all three ESG elements to be very important.

According to Mary Tressel, Moore’s global sector lead for ESG, the findings prove investment by firms in this area pay off overall. She said the positive impact is evident, adding: "If the revenue-growth figures we found were replicated across every large business in the world, the difference to global GDP growth would be significant. The investment companies have made in ESG is paying dividends that other businesses can easily replicate, and everything we found in our survey says they should.

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'ESG could be the answer many companies are looking for to differentiate their approach,' according to Mary Tressel of Moore Global. Picture: contributed.

Benefits

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“Large companies are using ESG to give them back the edge. It is bringing a holistic, stakeholder-centric approach into the boardroom and delivering results for shareholders at the same time. To compete with bigger players, smaller and medium sized companies can replicate the principles of ESG in a very authentic way and enjoy similar benefits around recruitment and retention as well as seeing financial uplift.

“ESG has been viewed in some quarters as a ‘nice to have’, but this study reveals the impact for adoption – on finances, human resources and brand influence. With today’s rising costs of doing business, areas like customer-retention will become even more important to businesses as they seek to come out stronger than the competition. ESG could be the answer many companies are looking for to differentiate their approach.”

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