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ESG: there’s no sustainability without social license

October 3, 2022

Companies are focusing more on social impact — a widely accepted idea by CEOs, media, politicians, and experts. A new McKinsey article shows that there has been a fivefold growth in internet searches for ESG (environmental, social, and governance) since 2019, and across industries, geographies, and company sizes, organizations have been allocating more resources toward improving ESG. 

The report reveals that:

• More than 90% of S&P 500 companies now publish ESG reports in some form, as do approximately 70% of the Russell 1000.

• In the 2022 first quarter, total assets for funds that say they are focused on sustainability and ESG reached $2.78 trillion.

“A major part of ESG growth has been driven by the environmental component of ESG and responses to climate change. But other components of ESG, in particular the social dimension, have also been gaining prominence.”, the authors say. Yet McKinsey’s partners also point out that sustainable performance is not possible without a social license. For them, stakeholders have to retain the perception that a business or industry is acting in a way that is fair, appropriate, and deserving of trust. And often, ESG is nothing more than an acronym or trend of the moment.

“Names will come and go (ESG itself arose after CSR, corporate engagement, and similar terms), and these undertakings are by nature difficult and can mature only after many iterations. But we believe that the importance of the underlying ideas has not peaked; indeed, the imperative for companies to earn their social license appears to be rising. Companies must approach externalities as a core strategic challenge, not only to help future-proof their organizations but to deliver meaningful impact over the long term.”

Source: McKinsey