Punching above their weight
To elucidate why household enterprise might play such an outsized position in furthering ESG targets, 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 large 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 buyers in 2020, greater than double the quantity the earlier yr. Giant publicly held firms and governments, by each sticks (rules) and carrots (focused subsidies) are reshaping the best way enterprise operates. And certainly, many firms 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 reviews.
However as we speak, such actions are simply desk stakes. To construct belief and safe their futures, companies should go additional and construct ESG into all points 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 some other sectors. Some 67% of respondents within the Edelman Belief Barometer’s 2020 report stated they trusted household companies, in comparison with simply 58% who belief public corporations—making household companies essentially the most trusted kind 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. Caring for their workforce and communities, for instance, have lengthy been a part of their DNA, courting again to effectively earlier than formal ESG commitments grew to become a world pattern.
However the internalization of ESG will make an enormous distinction. And we’re starting to see that notably in Asia. In our newest household enterprise survey, greater than 75% of companies in China, Japan, and Taiwan stated they put sustainability on the core of the whole lot they do, in comparison with simply 23% within the US and 28% in Canada (see chart under). Companies in Western economies, and particularly in North America, prioritized giving again to the group—a shorthand generally used to explain extra conventional philanthropy.