Weekly Business Insights from Top Ten Business Magazines | Week 309 | Strategy & Business Model Section | 2

Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since September 2017 | Week 309 | August 11-17, 2023

The triple play: Growth, profit, and sustainability

By Rebecca Doherty et al., | McKinsey & Company | August 9, 2023

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Consistent and profitable growth has been hard to achieve since the global financial crisis, making it critical for companies to explicitly choose growth in their mindsets, pathways, and execution capabilities.  Many executives believe making that growth sustainable and inclusive requires inscrutable trade-offs, forgoing revenue and profit for the sake of society and the planet.  That is not always the case. The authors new analysis indicates financially successful companies that integrate environmental, social, and corporate governance (ESG) priorities into their growth strategies outperform their peers—provided they also outperform on the fundamentals. The message is clear: not only can you do well while doing good—you can do better.  So how do triple growth outperformers manage that feat? They tend to be guided by five principles: 

1. Integrate growth, profitability, and ESG into the core strategy. Top performers don’t pursue ESG-related initiatives on the side but integrate them into the overarching corporate strategy alongside growth and profitability.
2. Innovate ESG offerings to drive value creation. Triple outperformers often operate on the cutting edge of innovation, both in what they do and how they do it. Many focus their innovation efforts primarily on top-line growth by developing offerings to better meet customer needs—and, where possible, serve emerging demand grounded in ESG.
3. Use M&A to capture profitable ESG growth pockets at an accelerated pace. Programmatic M&A can accelerate companies’ entry into new areas of growth.  Successful players have tended to look for underserved adjacent growth pockets and allocate ring-fenced funds to capture these opportunities. Many triple outperformers go a step further by integrating ESG criteria alongside existing financial and market criteria into their evaluation of potential adjacencies and M&A target selection.
4. Report and communicate transparently. Communication alone will not drive value, but transparency can accelerate investors’ recognition of future potential. Once a company has set clear and ambitious goals, it needs to continuously demonstrate where the value comes from and show strides on related initiatives—with external validation where possible—for progress to be credible in consumers’ and investors’ minds.
5. Embed strategic priorities in the organizational DNA. Triple outperformers translate their high-level growth, profitability, and ESG strategies into concrete initiatives that form part of the new corporate strategy. Management teams set out clear responsibilities, performance metrics, and targets and measure them rigorously.

3 key takeaways from the article

1. Consistent and profitable growth has been hard to achieve since the global financial crisis, making it critical for companies to explicitly choose growth in their mindsets, pathways, and execution capabilities.  Many executives believe making that growth sustainable and inclusive requires inscrutable trade-offs, forgoing revenue and profit for the sake of society and the planet.  That is not always the case. 
2. New analysis indicates financially successful companies that integrate environmental, social, and corporate governance (ESG) priorities into their growth strategies outperform their peers—provided they also outperform on the fundamentals. The message is clear: not only can you do well while doing good—you can do better.
3. So how do triple growth outperformers manage that feat? They tend to be guided by five principles: integrating growth, profitability, and ESG into the core strategy; innovating ESG offerings to drive value creation; using M&A to rapidly capture ESG growth pockets; tracking and reporting ESG and related data transparently; and embedding strategic priorities in the organizational DNA.

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Topics:  Strategy, Business Model, Sustainable Development