PODCAST: why shareholders care about purpose

I recently spoke to Doug Beal, Director of Social Impact at Boston Consulting Group, about the growth of environmental, social and governance (ESG) principles for business.

"You can create impact with your core business… in a way where you can actually make money at the same time.” - Beal

“[In the last two to three years] we've seen a big influx in the awareness of the need for corporations to play their role in society,” he told me.

{CF_AUDIO}

Doug said studies show there is a positive correlation between better ESG and better financial performance.

I asked him about companies which write an occasional cheque to charity or participate in a fun run and whether that is a scalable option? He said the impact of ESG can be scalable if you can think of a way to create impact with your core business in a way which actually makes money at the same time.

“Business leaders should think ‘for a company in my industry, what are the key skills; the capabilities; the products; the services I have that I can extend to marginalised groups?’”

Doug said even if conscious consumers are pushing for better ESG, there may also be some investors solely there for financial returns who want to know how it makes a difference.

“You can demonstrate a positive correlation between your social impact and how it will eventually affect shareholder returns. So it makes it a much easier conversation with the investors,” he said.

Doug also touched on the impact ESG can have when businesses are looking to expand into emerging markets and expelled the myth that ESG is a “rich country issue”.

“Think about the total benefit [you’re] bringing to a country [and] become part of the solution… Actively work with the government of that country to know what are their problems,” he suggested.

Doug explained corporations within emerging markets have a responsibility to help solve problems around social and economic development - but to be aware of any trade-offs.

“Take the trade-off between [deciding whether to] finance coal or not. The answer might be different in a place like Indonesia where, right now, if you don't have coal you don't have power,” he said.

Listen to the podcast above to hear the whole conversation.

Shayne Elliott is CEO of ANZ