There is growing consensus that the non-financial activities of a company, such as its impact on the environment and the surrounding community, have an impact on the business’s financial performance. A growing body of research, including recent work from BCG, has proved there is a strong correlation between a company’s impact on society and its Total Shareholder Return. We call this Total Societal Impact (TSI).
To understand the link between financial performance and TSI in Australia, we researched the current environmental, social and governance (ESG) performance of nearly 400 of Australia’s largest companies. We compared them with a further 6,300 companies from other developed markets including the US, Europe, and Asia.
Looking at ESG performance as a starting point for understanding the link between financial performance and Total Societal Impact in Australia, we found that while many Australian companies are performing well relative to their global peers, the large spread of results brings Australia’s overall average to below the global average.
In the four categories we measured, (environment, governance, employees, and community), Australia performed best in governance and worst in community compared with its global counterparts.
We also analysed performance by industry and found that Australian companies are performing well compared with their global counterparts in some industries such as industrial goods, real estate, and principal investors and private equity and not as well in others, such as energy or technology, media, and telecoms.
Our research shows that Australian companies have some catching up to do with the rest of the world. Overall, Australian companies rank below European companies and slightly below Asian and American companies in their ESG scores.
Across all categories and industries in Australia, a wide spread in performance emerged. Some companies are leading the charge, and others are lagging.
To learn more about why some companies are more effective than others in linking their societal and financial objectives, read our recent report Total Societal Impact: A New Lens for Strategy. The report goes further to show what types of societal impacts correlate with valuation multiples, margins, and shareholder returns. Now corporate leaders are rethinking the role of business within society.