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ESG: A growing focus on sustainability demands a response from marketers
Corporate social responsibilitySustainabilityManaging the marketing function
The way companies are managed is changing in response to myriad external pressures – climate change, social justice demands, COVID-19, continued tech disruption – and those have implications for marketers.
Environmental, social, and governance (ESG) criteria are a set of standards for a company’s operations used by many investors in the investment decision-making process.
For half a century, Anglo-American capitalism has been predicated on the notion, first espoused by Milton Friedman, that the primary, indeed the sole responsibility of a business is to make profits for its shareholders.
But just over two years ago, the Business Roundtable, a group of chief executive officers of nearly 200 major US corporations, said that investing in employees, delivering value to customers, dealing ethically with suppliers and supporting outside communities are now at the forefront of American business goals.
What it means for marketers
Marketers are having to look beyond just promoting a product or service to customers to embrace goals that affect wider society, and making sure both the public and the investor community are made aware of that. And as diverse board members are incentivised to meet ESG targets, marketing will be critical to telling that story.
The profile of board members is changing in response to the need for strategic guidance on “non-market crises that arguably carry the most enterprise risk for firms today”, says Wharton management professor Mary-Hunter McDonnell.
There is now a greater focus on ESG goals, which can be promoted by linking progress on these to executive pay.
A rise in ESG investments may push companies to become greener in order to increase their share price, suggests Luke Taylor, finance professor at Wharton.
Taylor also proposes maximising shareholder welfare rather than shareholder value. “There’s a difference there because shareholders may care about more than just profits.”