The return on investment in ESG programs is real – here’s the proof
What is the ROI from ESG? This is the question executives are constantly mulling over.
At first glance, some striking metrics come up repeatedly when digging into the benefits of investing in ESG programs. Some of these may sound familiar:
There is no doubt that these numbers are impressive and thus, heed action. Yet, they don’t answer the essential questions being asked in board rooms across the world, like:
What is the return on investment?
What is the impact on revenues?
What cost savings can we expect?
According to a Deloitte study, 59% of organizations already see a positive top-line impact from ESG investments, and more than half noted a positive effect on profitability. These are numbers that matter – and we need to share the success stories behind them.
Consumers are already sold on ESG
As a board member or executive leader, top-line growth is essential. However, we know it can feel like you have to choose between profit and ESG – which is simply untrue. Companies like Grainger and Unilever have reported results on increased earnings as a result of ESG-inspired activities. In its 2021 Corporate Responsibility Report, Grainger reported a steady increase in revenues from its environmentally responsible products. As stated in the report: “Our Environmentally Preferable Products (EPP) sales surpassed $710 million in 2020, showing our focus on helping our customers achieve their sustainability goals.” Considering the company realized $532 million in revenue from these same products in 2017, there’s no question the consumer demand is there. Additionally, Unilever’s Sustainable Living Brands, like Dove, Hellmann’s, and Domestos, have boosted the CPG giant’s top line. In 2018, the company reported the sustainable brands grew 46% faster than the rest of the business and delivered 70% of its turnover growth.
Sustainability leads to big cost savings
The return on investment of ESG initiatives doesn’t stop at revenue. Companies like McKesson, Medtronic, and Owens Corning are already reporting operational cost savings as a result of sustainability and efficiency tactics that feed down the bottom line.
In its 2020 Corporate Responsibility Report, McKesson reported its focus on Six Sigma product quality and business process improvement efforts resulted in $227.3 million in cost savings in fiscal year 2020 alone. The healthcare leader’s actions kept capital inside the business and spurred higher-quality customer relationships.
“These projects place heavy emphasis on defect reduction, faster cycle time and reduced waste. They have helped to reduce the number of variations customers experience and to identify what factors may drive that variation.” – McKesson, 2020 Corporate Responsibility Report
Similarly, healthcare technology giant Medtronic reported that its 80+ energy efficiency projects completed in fiscal year 2021 are expected to save more than $2.2 million in operating costs. And, finally, materials manufacturer Owens Corning provides full transparency into savings from its energy conservation efforts. In its 2020 Sustainability Report, the company breaks down the $1.6 million in annual savings expected for 31 projects that each have a 1-3 year payback period.
These examples only begin to scratch the surface when it comes to defining the true ROI of ESG, but they do show that there is more value behind the big numbers hitting the headlines. A lot more.
The Global Imprint team helps businesses align impactful growth to meet evolving market challenges. If your company is ready to make an impact with a strategic ESG program, reach out to us today!