The concept of doing well by doing good dates back to the origins of modern industrialized companies. For example, in 18th-century England, pottery manufacturer Josiah Wedgwood provided housing, training, and a rudimentary form of health insurance for his workers, even building an early version of a “company town.”
In the past few decades, the question of whether businesses should be socially responsible as well as profitable has been addressed in various ways, from the corporate social responsibility notions of the 1990s to the environmental, social, and governance (ESG) objectives that are critical to gauging an organization’s performance today.
But given mounting pressures to deliver on both financial and nonfinancial goals, it can be difficult for leaders to figure out just how to translate ESG directives into practical actions. Frequently, it’s about knowing what to focus on—and what to leave out.
The key to making good ESG decisions lies in first understanding where your company is on the ESG maturity curve. Most major companies fall somewhere on the spectrum between minimum practices—basic risk mitigation and reporting—and advanced next-level measures that fully embed ESG into strategy and operations.
The next step is to map your organization’s business model against each ESG dimension. As McKinsey senior partners Lucy Pérez, Hamid Samandari, and their colleagues suggest, define your company’s “superpowers”: What are its unique capabilities to have a differential impact?
This will in turn determine which of the three ESG dimensions you need to prioritize and how you can identify initiatives that matter most to the company’s business model. For example, a pharmaceutical manufacturer may focus on social metrics such as accessibility and affordability, whereas a renewables company may prioritize environmental metrics such as reductions in greenhouse-gas emissions