The impacts of climate change, social unrest, changing demographics, disruptive technologies and other factors have radically reshaped expectations and proved that financial results alone aren’t enough. Investors, employees and customers take a hard look at a company’s environmental, social and governance strategies, practices and performance when deciding where to invest, work and shop, says Mary Tressel, Practice Leader at Armanino LLP for Holtzman Partners.

Here are some reasons you should include ESG in your strategic plans.

ESG means more money

The International Finance Corporation found that companies with good environmental and social performance tend to outperform low performers by 210 basis points on return on equity and 110 basis points on return on assets.

When Willis Towers Watson surveyed board members and senior executives from around the globe, 78% indicated they believe ESG is a key contributor to strong financial performance.

Better pricing

Companies with positive ESG contributions can command premium prices for their products or services.

According to McKinsey, most C-suite leaders and investment professionals say they would be willing to pay about a 10% median premium to acquire a company with a positive record for ESG issues over one with a negative record.

Avoid greenwashing

Greenwashing means misrepresenting the ESG activities and practices. And it can lead to reputational backlash, legal scrutiny and negative media & advertising challenges. So a good ESG practice can avoid this false image.

Finance your business better

According to a report from ING, over 30% of Standard & Poor’s rating actions in the corporate sector between April and December 2020 were affected by ESG factors, of which 14% were related to environmental issues. And in 2019, 33% of Moody’s private sector rating actions cited ESG factors as material credit considerations.