A business’s performance, which was traditionally linked to pure-play financial and economic metrics, is now also taking full cognizance of the potential Environmental, Social and Economic (ESG) value erosion it can lead to. The demography of investors is also changing globally, with millennials demonstrating greater consciousness of the environmental and social impacts of their investments. Every business leader is now aware of the risks and opportunities that ESG brings with it. Not only has this given rise to ESG integration in mainstream financial instruments, but also in various equity-linked and fixed-income instruments which are paving the way for new world order.
With long-term value creation becoming business as usual, the challenge now lies in quantifying ‘long-term’ given the fact that a host of ESG risks have already started materialising. ‘Value realisation’ is the next step towards making sense of this. The complex process to realise the ‘true’ value of ESG practices begins with adopting the right approach towards them. Once implemented, it needs the right set of metrics to measure the impact that it creates. In the larger context, collaboration at various levels with different stakeholders will also pave the way to develop a common language for communicating impact and value creation.
The era of ‘Stakeholder Capitalism’ has just begun and getting on the bandwagon early will only lead to favorable outcomes.