Market Spotlight: Focus on ESG to Create Enterprise Value

The character of corporate sustainability has changed significantly over the past few years. Many enterprises are in the process of moving from a mainly philanthropically focused approach to a more integrated, metrics-driven way of looking at sustainability, linking sustainability efforts to business outcomes. An environmental, social and governance (ESG) approach allows organizations to become more strategic about their sustainability efforts, which can help them improve operational and financial performance, risk profiles, employee attraction and retention, brand value, and more.

The concept of ESG as an approach to corporate social responsibility began as an investor-driven attempt to identify sustainability-related topics and issues (nonfinancial value drivers) that can ultimately affect corporate performance but that are not accounted for in traditional financial statements.

Investors increasingly saw that companies with a strong ESG performance tended to perform better financially. The foundation of ESG consists of using data and metrics to measure performance across the three pillars, common ESG standards and frameworks to compare ESG performance, a focus on ESG materiality, and an industry-specific set of relevant issues.

ESG is often synonymously used as a corporate approach to sustainability that includes a broader focus on corporate stakeholders beyond investors, including employees and customers, among others.

This IDC Market Spotlight report, sponsored by UL, addresses:

• Investor focus on ESG drives CEO/Board-level focus
• Assessing existing ESG frameworks and standards: an evolving, fast-moving approach
• Incorporating ESG into valuation approaches
• ESG prioritizes a focus on product attributes to create enterprise value
• Third-party testing, certification, inspection, verification and validation services can enable better ESG reporting
• Internal and external ways of assessing, measuring and proving performance

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