Punching above their weight
To clarify why household enterprise might play such an outsized position in furthering ESG objectives, it’s helpful to have a look at the broader ESG panorama. The transfer to embrace sustainability is already a seismic shift for companies, powered by huge expectations from stakeholders, bold commitments from governments, and a tidal wave of capital funding. ESG funds, for instance, attracted a report $51 billion of internet new cash from traders in 2020, greater than double the quantity the earlier 12 months. Giant publicly held companies and governments, by means of each sticks (laws) and carrots (focused subsidies) are reshaping the way in which enterprise operates. And certainly, many companies are stepping up: they’re making commitments to scale back carbon emissions and sourcing electrical energy from renewable assets; they’re making their boards extra numerous and publishing sustainability studies.
However right this moment, such actions are simply desk stakes. To construct belief and safe their futures, companies should go additional and construct ESG into all facets of their enterprise: their reporting, technique, and transformation plans. And household companies are uniquely positioned and incentivized to take action for a few key causes. First, they’re extra trusted than every other sectors. Some 67% of respondents within the Edelman Belief Barometer’s 2020 report mentioned they trusted household companies, in comparison with simply 58% who belief public corporations—making household companies essentially the most trusted sort of enterprise. (Governments and the media got here in final.)
Second, their deeply held values and shared dedication to contributing to society are hard-wired. Taking good care of their workforce and communities, for instance, have lengthy been a part of their DNA, relationship again to nicely earlier than formal ESG commitments grew to become a world development.
However the internalization of ESG will make a giant distinction. And we’re starting to see that significantly in Asia. In our newest household enterprise survey, greater than 75% of companies in China, Japan, and Taiwan mentioned they put sustainability on the core of all the pieces they do, in comparison with simply 23% within the US and 28% in Canada (see chart beneath). Companies in Western economies, and particularly in North America, prioritized giving again to the neighborhood—a shorthand generally used to explain extra conventional philanthropy.