Impact
A NEW LENS FOR STRATEGY
The Boston Consulting Group (BCG) is a global management consulting firm and the world’s
leading advisor on business strategy. We partner with clients from the private, public, and not-for-
profit sectors in all regions to identify their highest-value opportunities, address their most critical
challenges, and transform their enterprises. Our customized approach combines deep insight into
the dynamics of companies and markets with close collaboration at all levels of the client
organization. This ensures that our clients achieve sustainable competitive advantage, build more
capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with
more than 90 offices in 50 countries. For more information, please visit bcg.com.
TOTAL SOCIETAL IMPACT
A NEW LENS FOR STRATEGY
DOUGLAS BEAL
ROBERT ECCLES
GERRY HANSELL
RICH LESSER
SHALINI UNNIKRISHNAN
WENDY WOODS
DAVID YOUNG
3 FOREWORD
5 PREFACE
6 EXECUTIVE SUMMARY
3 8 A CALL TO ACTION
3 9 APPENDIX
Background and Outputs of Quantitative Analysis
Still, we all have much more work to do, as the report indicates. A
growing number of institutions around the world want to broaden
their long-term investment objectives beyond traditional financial
metrics to include the economic, environmental, and societal impact
of their investment programs. This presents critical challenges for in-
vestment managers to come up with new kinds of performance score-
cards that include attributes such as the carbon profile of an invest-
ment portfolio or scores related to workforce quality and supply chain
sustainability. As the authors point out, many companies are able to
measure the outcomes directly associated with their core businesses
but have difficulty sizing their ultimate societal impact.
The BCG study rightly distinguishes the effects across sectors. The oil
and gas industry, as the authors note, will obviously have different op-
portunities and challenges than biopharmaceuticals, technology,
banking, or consumer packaged goods. We believe more industry-
specific and regional-specific research is still needed.
—Ronald P. O’Hanley,
President and CEO, State Street Global Advisors
Note
1. All rankings according to State Street Global Advisors, December 31, 2016. Data
updated annually.
All too often, however, other demands can take precedence. CEOs to-
day are under enormous pressure on a number of fronts, from trans-
forming their businesses for the digital age to adapting to significant
geopolitical shifts to responding to the demands of activist investors
and other shareholders. And while it is clear that both employees and
customers are gravitating toward companies that operate with a sense
of meaning and purpose, the fact remains that CEOs know missing
earnings expectations or losing ground to competitors can come with
severe penalties.
—Rich Lesser
President and Chief Executive Officer, The Boston Consulting Group
Companies that adopt the TSI lens when setting strategy or ad-
justing their business model reduce the risk of significant nega-
tive events (such as a major manufacturing accident or a sales
practice scandal) and open up valuable new opportunities—
thus likely increasing corporate longevity.
•• A strategy that takes societal impact into account can help compa-
nies identify and gain access to new locations, markets, and
customer segments.
•• In oil and gas, EBITDA margins were 3.4 percentage points higher,
all else being equal, for the top performers in maintaining process-
oriented health and safety programs than for the median perform-
ers. There was also a strong link between margins and perfor-
mance in employee training.
•• Companies need clear goals for the societal benefits they plan to
create, and they must measure their performance against those
goals as well as the effect of their TSI activities on financial
performance.
and identified the link between individual cant in predicting the valuation multiples
ESG topics and financials in specific indus- of companies in all the industries we
tries. Our study encompassed five industries: analyzed.
consumer packaged goods, biopharmaceuti-
cals, oil and gas, retail and business banking, •• In each industry, investors rewarded the
and technology.1 For individual industries, we top performers in specific ESG topics with
looked at the link between performance in valuation multiples that were 3% to 19%
specific ESG topics (such as ensuring a re- higher, all else being equal, than those of
sponsible environmental footprint or promot- the median performers in those topics.
ing equal opportunity) and market valuation
multiples and margins, both contributors to •• Top performers in certain ESG topics had
TSR.2 Our key findings: margins that were up to 12.4 percentage
points higher, all else being equal, than
•• Nonfinancial performance (as captured by those of the median performers in those
the ESG metrics) was statistically signifi- topics.
SHAREHOLDER
VALUE
SHAREHOLDER SOCIETAL
VALUE IMPACT
SOCIAL
RESPONSIBILITY
CORPORATE
LONGEVITY CORPORATE
LONGEVITY
Exhibit 2 | All Business Practices and Activities Have an Impact on Both TSR
and TSI
Creating a product
or service that
has intrinsic societal
value
TSI
Externalizing poor
environmental or
social practices
Practices that
increase risk or result
in accidents or
scandal
TSR
Source: Adapted from Jane Nelson, “Leveraging the Development Impact of Business in the Fight Against Global Poverty,”
in Transforming the Development Landscape: The Role of the Private Sector, The Brookings Institution, 2006.
Certainly, some activities fall in the other three First, companies are under mounting
quadrants, dragging down TSR, TSI, or both. pressure from a range of stakeholders to play
For example, companies that have focused al- a more active role in addressing social and
most exclusively on delivering solid returns to environmental issues such as global health
shareholders have at times failed to invest in challenges, climate change, and gender
the best environmental practices or safety dis- inequality. Employees—millennials, in
ciplines. However, societal expectations, regula- particular—not only want their employers
tions, and investors’ attention to social and en- to have a greater sense of purpose but also
vironmental issues have evolved, making many seek an active role in companies’ societal
previously permitted activities untenable. impact efforts. In addition, customers are
increasingly attuned to information related to
Consequently, companies find that activities a company’s social and environmental
that previously boosted TSR in the short impact—information that can shape their
term, but had a negative impact on society, buying decisions. Some governments,
ultimately become a drag on TSR. As a result, meanwhile, expect companies to do more to
those activities move from the lower-right solve economic and social problems and are
quadrant to the lower left, often damaging looking to collaborate with companies in
the brand in lasting ways and even threaten- such initiatives. The need for greater private-
ing the company’s survival. sector involvement in these efforts is clear:
the annual gap between the cost of achieving
The degree to which management has fo- the SDGs and the available public funding is
cused—and continues to focus—on TSR as projected to be as much as $2.5 trillion—
the primary objective varies by region. In a shortfall that many believe the private
continental Europe, companies have long sector must largely address.1
subscribed to the “stakeholder model,” in
which employee, community, and environ- Second, the investment community is increas-
mental interests are all considered in addi- ingly focused on companies’ social and envi-
tion to shareholder interests. This culture has ronmental performance. A decade or so ago,
its roots in an industrial structure dominated socially responsible investing (SRI) encom-
by family-owned enterprises and a regulatory passed two primary approaches. The first was
financial returns. For example, a 2011 study Our first step was to identify the ESG topics
showed that companies with good environ- that are most important in each industry we
mental and social policies not only have studied. These topics all relate to the compa-
higher stock market returns but also perform nies’ core business models and operations
better on return on assets and return on and concern both the creation of positive
equity than companies that have not adopted societal impact (such as expanding financial
good environmental and social policies.1 In inclusion in retail and business banking) and
addition, research published in 2015 found the minimization of negative societal impact
that average stock returns for firms with good (such as reducing waste in oil and gas).
performance on material ESG topics are
significantly higher than the returns for firms
with poor ratings.2 And a recent meta study
of over 200 papers revealed that 80% find
We identified the ESG topics
that better ESG is linked with better stock that are most important in
price performance.3
the industries we studied.
While these studies provide support for the
value of contributing to society, they do not
offer a blueprint for how companies can actu- To identify these ESG topics, we gathered ex-
ally go about this. To that end, we quantified tensive input from BCG industry partners, cli-
the relationship between specific topics and ents, and industry experts. We also drew on
financial benefits in four industries to help information from many organizations, in par-
companies understand which ESG topics they ticular, the Sustainability Accounting Stan-
should focus on.4 dards Board (SASB), which has zeroed in on
nonfinancial topics that it considers to be
“material”—that is, likely to be of interest to
The BCG Methodology investors because they can affect financial
There is no well-established methodology for performance. Our list of important ESG top-
measuring the full economic, social, and ics by industry ultimately included topics
environmental impact of a company’s deemed material by the SASB as well as addi-
activities on society. We can, however, tional topics that BCG believes are important
We then analyzed, by industry, the relation- The Link Between ESG and
ship between nonfinancial (ESG) perfor- Financial Performance
mance and two key financial variables: valua- Our quantitative analysis revealed a concrete
tion multiples and margins (EBITDA margins link between performance on specific ESG
and gross margins).5 For banking, we used net topics and both valuation multiples and
income margin, a more relevant metric for margins. We found positive, statistically
that industry. Valuation multiples reflect in- significant correlations on valuation multiples
vestor sentiment about long-term prospects for 16 topics and positive, statistically
and risk, and margins reflect current value- significant correlations on margins for 17
added. Both are important contributors to topics out of a total of 65 topics examined
corporate value creation, as reflected in TSR. across all industries.6
The analysis looked at ESG performance and
valuation multiples for 2013 through 2015, It is important to note that our analysis does
while the margin analysis used data from not prove causality. In fact, in some cases it
2014 and 2015. may be that higher margins, for example,
allow companies to invest more in ESG
Our valuation analysis relied on Smart Multi- initiatives, resulting in stronger ESG
ple, BCG’s well-established, proprietary ap- performance. However, in many cases it is
proach for predicting quantitatively the valu- likely that performance in these topics is
ation of public companies. (See The 2013 contributing to financial performance.
Value Creators Report: Unlocking New Sources of Ultimately, the two factors—strong ESG
Value Creation, BCG report, September 2013.) performance and strong financial
The Smart Multiple approach uses a multiple performance—may be self-reinforcing.
regression model incorporating traditional fi-
nancial performance measures such as mar- The results of our valuation and margin anal-
gin levels, growth rates, debt leverage, and yses provide encouragement to companies fo-
company size. By adding nonfinancial mea- cusing on ESG-related issues. We expect that
sures to the Smart Multiple model, we can de- evidence of the positive correlation between
60
40
74
20
0
Predicted multiple
Unexplained Nonfinancial metrics
Financial metrics
Sources: S&P Capital IQ; Oekom Research; MSCI; BCG Value Science Center.
• Promoting transparent
lobbying
• Socially responsible
sourcing
12% for biopharmaceuticals, 19% for oil and formers. In oil and gas, for example, if medi-
gas, and 3% for retail and business banking. an performers in the health and safety topic
had an EBITDA margin of 30%, our analysis
So, why would we see a correlation with showed that the EBITDA margin for top
downside topics but not upside oppor- performers in that topic—all other things
tunities? The downside topics are well known being equal—was 33.4%. (See Exhibit 5.)
and so, not surprisingly, relatively good
metrics have been developed to measure In most cases, for consumer packaged goods,
them. The upside opportunities, in contrast, biopharmaceuticals, and oil and gas, the posi-
tend to be newer concepts for which the tive relationship showed up in both EBITDA
relevant metrics might be difficult to collect and gross margins. For the purposes of the in-
or of weaker quality. If a bank aims to dustry discussions that follow below, we high-
increase financial inclusion, for example, light the measure for which the correlation
what would be the most meaningful measure was strongest.
to track that? It is possible that given the
challenges of measuring upside It is not difficult to understand why strong
opportunities, investors are not able to performance in the downside topics would
integrate them effectively into valuations. contribute to higher margins. Many of them
are related to practices that can lower costs,
The Link Between TSI and Margins. We such as the reduction of water and energy
found a positive correlation between margins use and minimizing the likelihood of a cata-
and both upside opportunity and downside strophic operating incident.
ESG topics in consumer packaged goods,
biopharmaceuticals, oil and gas, and retail While performance in many upside opportu-
and business banking. In our analysis, we nity topics may not yet be rewarded by inves-
examined margin premiums—the percentage tors (as reflected in our valuation findings), it
point difference between margins for top can have a direct effect on performance by
performers in ESG topics and median per- helping a company create a sustainable com-
• Socially responsible
sourcing
petitive advantage over rivals. A more inclu- 5. EBITDA (earnings before interest, taxes, depreciation,
sive supply chain, for example, can help a and amortization) margin is EBITDA divided by
revenue; gross margin is gross income divided by
company attract a broader, more socially con- revenue.
scious customer base. 6. We looked at ten ESG topics that applied to all four
industries and at industry-specific topics: five in retail
and business banking, six in consumer packaged goods,
six in biopharmaceuticals, and eight in oil and gas.
7. If median performers had a valuation multiple of 10x,
and top performers had a 20% premium, the multiple
Notes for those top performers would be 12x.
1. R. Eccles, I. Ioannou, and G. Serafeim, “The Impact of 8. This includes downside topics for which we did not
Corporate Sustainability on Organizational Processes find a correlation individually.
and Performance,” Harvard Business School Working
Paper, 2011.
2. M. Khan, G. Serafeim, and A. Yoon, “Corporate
Sustainability: First Evidence on Materiality,” Harvard
Business School Working Paper, 2015.
3. G. Clark, A. Feiner, and M. Viehs, From the Stockholder
to the Stakeholder: How Sustainability Can Drive Financial
Outperformance, 2015.
4. See Goldman Sachs, “The PM’s Guide to the ESG
Revolution,” 2017; and Bank of America, “Why
Companies That Do Good May Be the Best Performers.”
A number of ESG topics are common across •• Margins. Gross margins were 4.8 percent-
industries. Efforts to support diversity and to age points higher, all else being equal, for
reduce the environmental impact of a compa- top performers in integrating social
ny’s operations, for example, are relevant for factors into sourcing and procurement
most corporations in all the industries we than for median performers and 3.3
studied. In addition, there are some less obvi- percentage points higher for top perform-
ous areas—most notably, efforts to address ers in promoting employee safety. Margins
humanitarian crises—that are applicable to were also higher, all else being equal, for
multiple industries. (See the sidebar “Busi- top performers in four environmentally
ness to the Rescue.”) More often, however, ar- related areas—ensuring a responsible
eas where companies have the most leverage environmental footprint, limiting negative
to deliver societal and business impact are effects on biodiversity and ecology,
distinct to their industries. minimizing the impact of products and
packaging, and conserving water.
In addition to the negative correlation noted Mastercard’s partnership with SASSA (South
above related to integrating environmental African Social Security Agency) is a prime ex-
factors into credit risk analysis, we also saw a ample of how a technology platform can sup-
negative correlation between performance in port societal inclusiveness.2 The partnership
protecting and promoting equal opportunity provides social security payments electroni-
and net income margins. It is possible that cally through a biometrically authenticated
such efforts may be associated with invest- card. The program not only increased finan-
ments in the short term, which affect margins. cial inclusion in South Africa from 67% to
75% in the first year but also slashed govern-
ment costs by $375 million over five years,
Technology: Expanding Economic strengthening the company’s government re-
and Social Inclusion lations. At the same time, the program
In our interviews, it was clear that technology demonstrated the power of a business model
companies often view their core business as that can be tailored to other markets.
making dramatic contributions to the overall
good of society. A number of online plat-
forms, for example, give people in remote
areas access to information and to global
Online platforms can
marketplaces, a development that supports support economic inclusion
economic inclusion and equity.
and equity.
We were unable to analyze the relationship
between ESG performance and financial per-
formance, as we did for the other four indus- Facebook, meanwhile, says that it is
tries, because of data challenges. In particu- committed to ensuring that every person can
lar, data is not currently tracked for a number participate in the global digital community,
of the areas in which we believe technology regardless of their location, socioeconomic
companies can have a significant societal im- status, or physical limitations. The company
pact. This may be in part because business builds innovative tools to connect them,
models vary so dramatically in this industry. including Free Basics, which offers services
As a result, a fixed set of data that is relevant via smartphones in countries where internet
for all technology companies is much harder access may be prohibitively expensive for
to identify than for, say, banks. many people. The services, which include
content on news, employment, health, and
Despite such issues, our study highlighted education are available for free without data
technology companies’ strong commitment to charges through a partnership with local
making a positive societal impact. Perhaps telecommunications companies. Free Basics
their most compelling opportunity is to pro- has launched in more than 65 countries and
mote social and economic inclusion among provides more than 1,000 services worldwide.
marginalized and underserved groups. Given The company also built Facebook Lite, a
the wide variety of business models, the version of Facebook for people with low-
routes to achieving that can vary considerably. bandwidth internet. Today 200 million
people around the world use Facebook Lite
Airbnb, for example, is helping to draw tour- to connect.
ism dollars into neighborhoods that wouldn’t
ordinarily attract visitors. In fact, about 74% Microsoft, for its part, is focused on a major
of Airbnb listings are located outside the inclusion issue in the US: internet access. The
When Visa announced the launch of its 3. Building a Portfolio of Scalable Initiatives
foundation, in 2017, the company decided Leveraging the Core Business. For each
If the answer to those questions is no, the Third, the CEO needs to assess the company’s
company is likely not realizing its full poten- current TSI. This requires a comprehensive
tial in TSI and is missing out on significant review of the economic and societal benefits
opportunities. of everything the company does, from the full
value of its products and services to the way
it sources raw materials to the way it sells
TSI cannot be the sole and distributes to the role it plays in its
industry.
responsibility of one team
Fourth, the CEO must turn vision into action
in the organization. by integrating TSI concepts into strategy set-
ting and the business model. Our research
shows that absent demonstrated commitment
There are four things the CEO can do to help from the top, it is difficult for the TSI mindset
the company improve its TSI and TSR. First, to become embedded in corporate thinking
the CEO should envision what the company’s and operations.
societal impact should be. In particular, CEOs
need to look into the future to gain insight on TSI cannot be the sole responsibility of
how their core product or service should one team in the organization. Rather,
evolve to be in step with changing societal it must be elevated alongside the goal of
expectations and demands and evolving creating value for shareholders and become
regulations. Even if shifts to the product or an essential part of the senior team’s agenda.
service portfolio may not offer near-term
Our quantitative study is based on an analy- (See Table 2 for a complete list of topics and
sis of 343 global companies for the three-year metrics, where applicable, by industry.)
period from 2013 through 2015. The sample
includes 97 companies in consumer packaged
goods, 39 in biopharmaceuticals, 66 in oil and Valuation Analysis
gas, and 141 in retail and business banking. We categorized each topic as either downside
topic or upside opportunity. We leveraged
For all companies in the sample, we gathered BCG’s proprietary Smart Multiple
financial data from S&P Capital IQ and envi- methodology to analyze the impact of each
ronmental, social, and governance (ESG) data topic as well as the combined downside and
from MSCI and Oekom Research, two ESG combined upside measures on a company’s
data vendors. Data was collected for 2013 valuation multiple.2 Smart Multiple is a
through 2015 because of the availability of multivariate model that uses fundamental
financial data and the completeness of ESG inputs to generate a valuation for the
reporting for the companies in our sample. business at a certain point in time. Using this
Our analyses are on the company-year level, approach, we have found it possible to
meaning that we have up to three observa- identify what differentiates multiples in an
tions per company. industry and, in this way, to explain why
different companies have different multiples.
In creating our industry-specific topic scores,
we took the following steps: First, we mapped We added each ESG topic to the existing (fi-
the ESG metrics provided by MSCI and Oe- nancial) drivers of valuation multiples within
kom against the ESG topics we had devel- the multivariate regression model. As a multi-
oped and selected the most appropriate met- variate regression model, Smart Multiple al-
rics for each topic. (See Table 1 for important lows us to independently identify and quanti-
ESG topics by industry.) Second, we normal- fy the relationship between valuation
ized all ESG measures across all four indus- multiples and ESG scores. Unless otherwise
tries from the two data vendors to adjust for noted, all results of our two-tailed t-tests are
differences in reporting scales by using a significant at the 95% level (p < 0.05 and
z-score method.1 If there were fewer than 30 |t| > 1.96).
companies reported for an individual mea-
sure, we removed the measure from the anal- We found that several individual topics (as
ysis. Finally, we averaged similar normalized well as the aggregated downside topics) have
individual measures to create the topic scores. a positive, statistically significant relationship
Table 1
INPUTS
Manufacturing • Ensuring a responsible • Implementing fair and responsible • Avoiding and combating
and business environmental footprint compensation practices corruption
practices – Pursuing efficient – Pursuing living wages for employees; – Maintaining strict ethical
energy consumption encouraging long-term thinking in standards; working
and resource use; compensation structures against multiple forms of
minimizing harmful • Promoting employee safety corruption
emissions – Ensuring robust health and safety • Avoiding anticompetitive
management systems behavior
• Promoting workplace flexibility – Ensuring that no
business practices unduly
– Providing adequate benefits (e.g., health
prevent, reduce, or
care, leave); prioritizing employee
manipulate competition
happiness and satisfaction
in a marketplace
• Protecting and promoting equal
opportunity • Maximizing impact of
corporate giving programs
– Ensuring nondiscrimination in hiring and
– Leveraging core business
advancement; encouraging and valuing
and employee skills to
diversity
maximize the benefit of
• Supporting local community development traditional corporate
– Donating to local nonprofits and providing philanthropy programs
benefits to the community • Promoting transparent
• Supporting ongoing employee training lobbying
– Investing in training, education, and – Reporting on
development for current employees and contributions to lobbyists
the workforce of the future and all lobbying efforts
OUTPUTS
Products • Providing support in humanitarian crises
and services;
distribution
Manufacturing • Limiting negative effects on • Investing in health and safety best practices for • Lobbying for industry-wide
and business biodiversity and ecology migrant workers standards and norms
practices – Managing impacts on – Maintaining best practices in light of commonly – Creating better standards;
wildlife, air, land, and disenfranchised and unorganized migrant lobbying for those standards
groundwater workers
• Reducing waste • Preventing mistreatment of animals
– Minimizing levels of waste, – Treating animals well and planning for increased
including food waste animal welfare regulation
OUTPUTS
Products • Minimizing impact of • Ensuring that products reach bottom of pyramid • Implementing an efficient and
and services; products and packaging – Investing in products appropriate for BOP and effective recall process
distribution – Reducing solid waste sent ensuring that they reach underserved areas – Monitoring for adverse
to landfills through better • Fair marketing and accurate labeling events; recalling products
design of products and when necessary
packaging – Demonstrating the benefits of consumption in
an ethical manner and labeling accurately
– Investing in capacity to
recycle postsale • Implementing a food safety management program
– Avoiding spoilage and contamination; investing
in supply chain traceability
• Improving nutritional and health attributes of
product portfolio
– Taking into account key nutritional and health
concerns in the creation of products
Sourcing and
procurement
OUTPUTS
Products • Minimizing impact of • Expanding access to drugs • Committing to
and services; products and packaging – Providing necessary drugs to markets in need responsible/value-based pricing
distribution – Reducing improperly with fair, affordable pricing structures – Pricing on the basis of value
disposed waste or waste • Investing in disease and treatment education even in the absence of
sent to landfills postsale competition
through turn-in and – Educating the public (especially underserved
populations) beyond traditional marketing • Maintaining product quality
recycling programs and safety
• Practicing ethical marketing
– Implementing robust
– Promoting products responsibly and reporting processes to minimize recalls
risks and benefits accurately and audit raw materials
• Reducing spread of counterfeit drugs
– Developing anticounterfeit technologies;
cooperating with law enforcement; pursuing
relevant partnerships; informing customers
• Supporting orphan and neglected diseases
– Developing an R&D pipeline targeting orphan
and neglected diseases
OUTPUTS
Products • Investing in alternative • Developing robust disaster
and services; energy management and response
– Advanced biofuels, solar plans
distribution
• Investing in energy efficiency – Championing a safety culture
education for end users
OUTPUTS
Products • Supporting organizations • Ensuring fair debt collection • Integrating environmental
and services; promoting climate action – Avoiding deceptive collection practices factors into credit risk analysis
distribution – Lending to organizations • Ensuring fair selling practices – Considering industry-specific
(e.g., SMEs and NGOs) environmental factors in
devoted to environmental – Providing transparent, culturally sensitive, and lending, investment, and due
protection and clean sound advice diligence
energy • Investing in organizations promoting social • Maximizing benefit of
development government-mandated financial
– Lending to organizations (e.g., SMEs and NGOs) community contributions
with clear social missions – Selecting high-social-impact
• Promoting financial education programs; implementing them
– Providing consumers with money management effectively; measuring their
education (e.g., retirement planning) impact
• Promoting financial inclusion
– Increasing access and affordability for individuals
in underserved markets
• Promoting SMEs
OUTPUTS
Sources: SASB; GRI; MSCI; Oekom Research; expert interviews; BCG analysis.
Table 2
Integrating environmental Environmental aspects in the retail credit rating process Oekom Research
factors into credit risk analysis Integrating environmental factors into credit risk analysis MSCI
Investing in organizations Socially responsible investment products and services Oekom Research
promoting social development Volume of strict and diligently-selected socially responsible investments Oekom Research
Equal access to financial services Oekom Research
Promoting financial inclusion
Social financial services Oekom Research
Certification of the information security management system to an
Oekom Research
international standard
Securing business and Implementation of an information security management system Oekom Research
personal data
Measures to ensure customer security Oekom Research
Securing business and personal data MSCI
Avoiding and combating corruption MSCI
Business Ethics MSCI
Avoiding and combating
Code of business ethics Oekom Research
corruption
Compliance procedures Oekom Research
Major controversies relating to business ethics Oekom Research
Certification of the environmental management system to an
Oekom Research
international standard
Energy efficiency MSCI
Ensuring a responsible
environmental footprint Ensuring responsible environmental footprint MSCI
Minimizing carbon intensity in reserves MSCI
Position on climate change Oekom Research
Environmental standard for the sourcing of renewable raw materials
Oekom Research
and/or bio-based products
Environmental supplier standard Oekom Research
Environmentally responsible
sourcing Procedures to ensure compliance with the environmental standard for
Oekom Research
the sourcing of renewable raw materials and/or bio-based products
Procedures to ensure compliance with the environmental supplier
Oekom Research
standard
Implementing fair and Position on non-regular employment Oekom Research
responsible compensation
practices Public disclosure of CEO-to-employee compensation ratio Oekom Research
Certification of the health and safety management system to an
Oekom Research
international standard
Promoting employee safety Health and safety management system Oekom Research
Implementation of a health and safety management system Oekom Research
Political contributions Oekom Research
Promoting transparent
lobbying Transparency on participation in public-policy making and lobbying
Oekom Research
activities
Shaping regulatory
Not available
environment and policy
Supporting organizations
Not available
promoting climate action
Avoiding anticompetitive
Not available
behavior
Maximizing impact of
Not available
corporate giving programs
Providing support in
Not available
humanitarian crises
Supporting local community
Not available
development
Technology
Promoting employee safety Health and safety management system Oekom Research
Protecting and promoting Measures to promote equal opportunities and diversity Oekom Research
equal opportunity
Supplier standard with regard to labor rights and working conditions Oekom Research
Developing technology
products and services that Not available
help protect the environment
Table 3
Valuation Analysis
DIFF. BETWEEN
TOP QUINTILE T-STAT (STAT.
INDUSTRY TOPIC AND MEDIAN (%) SIG. IF |T|>1.96)
Conserving water 5 3.08
Consumer packaged
Ensuring a responsible environmental footprint 4 3.08
goods
Oil and gas Maintaining process-oriented health and safety programs 21 6.21
*In banking, no individual topics had a statistically significant correlation with valuation multiples. However, when analyzed collectively, the topics
were statistically significant. For this reason, we have included in the table the individual topics that were closest to having statistical significance.
Margin Analysis
AVERAGE MARGIN T-STAT
PREMIUM OF TOP VS. (STAT.
MEDIAN PERFORM- SIG. IF
INDUSTRY TOPIC FUNDAMENTAL ERS (PP) |T|>1.96)
Retail and business Environmentally responsible sourcing Net income margin 3.4 2.67
banking
Integrating environmental factors into
Net income margin –3.3 –3.6
credit risk analysis
The authors would like to thank the Garland, Amy Halliday, and Sean
following BCG colleagues, who Hourihan for their contributions to
provided invaluable guidance on the editing, design, and production
industry-specific content: Ashwin of the report.
Adarkar, Ramón Baeza, Brent The authors thank Tufts
Beardsley, Maurice Berns, Kilian University’s Fletcher School’s
For Further Contact Institute for Business in the Global
Berz, Rolf Bixner, Marcus Bokkerink, To discuss this report, please
Jim Brennan, Charles André Context for supporting the
contact one of the authors. background research on companies’
Brouwers, Sarah Cairns-Smith, Priya
Chandran, Michael Choy, Jorge ESG reporting. In particular, they
Douglas Beal thank Bhaskar Chakravorti, Michael
Colado, François Dalens, Julien Director, Social Impact
Dangles, Laurent Desmangles, Cretz, and Athul Ravunniarath.
BCG Hong Kong
Alexander Meyer zum Felde, Michel +852 2506 2111
Frédeau, John Garabedian, beal.douglas@bcg.com
Alexandre Gorito, Jim Hemerling,
Brad Henderson, Bruce Holley, JT Robert Eccles
Hsu, Richard Hutchinson, Adam Senior Advisor
Ikdal, Jean-Manuel Izaret, Udo Jung, robert.eccles@sbs.ox.ac.uk
Hemant Kalbag, Ken Keen, Derek
Kennedy, Jake Leslie Melville, Gerry Hansell
Zhenya Lindgardt, Claire Love, Mark Senior Partner and Managing Director
Lubkeman, Amyn Merchant, Euvin BCG Chicago
Naidoo, Emmanuel Nazarenko, +1 312 993 3300
Johan Öberg, J. Puckett, Michael hansell.gerry@bcg.com
Ringel, Tal Rosenbloom, Michael
Rüßmann, Pablo Ruiz Rodriguez, Rich Lesser
Rohan Sajdeh, Vinay Shandal, President and CEO
Rebecca Solow, Henning Streubel, BCG New York
Steve Thogmartin, Alan Thomson, +1 212 446 2800
Peter Tollman, Pablo Tramazaygues, lesser.rich@bcg.com
Jean Francois van Kerckhove, Elliot
Vaughn, Merel Venneman, Ian Shalini Unnikrishnan
Walsh, John Wenstrup, and Zia Partner and Managing Director
Yusuf. BCG Chicago
+1 312 993 3300
The authors acknowledge the con- unnikrishnan.shalini@bcg.com
tributions and efforts of key mem-
bers of the Social Impact practice Wendy Woods
who supported this study, especially Senior Partner and Managing Director
Brenda Thickett, Taylor Tinmouth, BCG Boston
and Susie Margolin. They also +1 617 973 1200
thank the support of the Legal and woods.wendy@bcg.com
Contracts team, particularly Linda
Costa and Jennifer Fessler. David Young
Senior Partner and Managing Director
The authors thank Amy Barrett for BCG Boston
her contributions to the writing of +1 617 973 1200
this report and Katherine Andrews, young.david@bcg.com
Gary Callahan, Kim Friedman, Abby
To find the latest BCG content and register to receive e-alerts on this topic or others, please visit bcg.com.
Follow The Boston Consulting Group on Facebook and Twitter.
10/17
bcg.com