The ESG maturity model — from a shareholder perspective to system value perspective

To help demonstrate the journey organisations are taking when considering sustainability factors, we presented our three-stage environmental, social, and governance (ESG) maturity model to the participants of each roundtable. This approach allowed the participants to visualise their organisational sustainability journeys and draw out the potential knowledge and skills gaps.

Figure 1. The ESG organisational maturity journey²

The model introduces three perspectives that organisations move through as they build their capacity and embed sustainability. Table 1 shows the characteristics for each perspective.

Table 1. The ESG organisational maturity journey perspectives

It is interesting to note here that not a single roundtable participant disagreed with the direction of the ESG maturity model or offered alternative visions for discussion.At each roundtable, we asked participants to estimate where their organisations were located on the ESG maturity model. Most respondents (57%) believed their organisations were either at the shareholder perspective or on the road to stakeholder perspective. Only 1% of respondents ranked their organisations as having a system value perspective, where governance is aligned with the social space and dependent upon the wider environmental pillar. However, it is heartening to note that 13% of respondents see their organisations currently moving from a stakeholder perspective and developing a long-term system value perspective.

Figure 2. Roundtable participants estimations of their organisations’ ESG maturity

Participants made comments that demonstrate each perspective in the evolving organisational sustainability mindset:Shareholder perspective

‘ESG is a nice opportunity for finance if we want it and if budget allows’.
_{CFO, Media, Comms & Entertainment, US}

‘Finance is the moderator. Don’t lay claim, it comes at a cost’.
_{CFO, Food & Retail, China}

‘Keeping the balance of sustainability and affordability’
_{COO, Education & Professional Training, Malaysia}

‘More of a marketing term than value creation’
_{Senior Manager, Banking, Financial Services & Insurance, Australia}

‘Still, it is difficult to judge how to plan and what level of effort to allocate towards ESG. At the moment, financial statements and ESG reports exist separately from each other’.
_{Senior Financial Analyst, Technology & IT Services, India}

Towards a stakeholder perspective

‘ESG opens us to new perspectives — not just cost/revenue’.
_{Head of Controlling, Energy, Electricity & Power sector, Poland}

‘Repositioning company, looking at projects/clients to make an old traditional energy company more sexy on the market’
_{Head of CFO Advisory, Business Consulting & Services, Poland}

‘Companies are prioritising what’s important because they cannot report on everything’.
_{Consultant, Business Consulting & Services, UK}

‘Here the government enforces more restrictions. This uplifts the community around the hotel to think about ESG. Recognise that addressing ESG is required for survival’.
_{CFO, Travel, Leisure & Tourism, China}

‘Understanding of business and what makes business tick and, you know, the value and risk management and if they understood how this can play a role there, they will realise how important it is to have a good strategy and be seen as being a good corporate citizen’.
_{Strategy & Business Manager, Technology & IT Services, Australia}

Towards a system value perspective

‘When we look at investment appraisal, it will not be seen just as an investment appraisal based on return on investment, financial return on investment. It will also look at social return investment. So, we will be looking at it, making sure that we know how we spend money that delivers against that ambition as well’.
_{Head of Finance, Energy, Electricity & Power Sector, UK}

‘It’s much more about investment products and the quality of both the ESG credentials of the organisation and that of the organisation they’re investing in — and then with sustainable supply chain and procurement across the industries’.
_{Managing Director - CFO and Enterprise Value, industry: IT & services, UK}

‘ESG compliance has impact on pricing, capital requirements, private equity funds, valuation and ratings’.
_{Financial Controller, Travel, Leisure & Tourism, UK}

‘We integrate more and more of the supply chain, so we hit both operational standards, plus efficient and carbon efficiency standards. Our supply chains are much more integrated and part of the solution’.
_{Financial Controller, Travel, Leisure & Tourism, UK}

As the majority of our roundtable participants identify their organisations at the shareholder or stakeholder perspective (86%), the research insights here are slightly skewed towards early journey sustainability activity examples.The need for organisations to reach a system value perspective recognises the threefold crisis of a climate emergency, dramatic nature loss, and rising social inequality affecting the planet. Addressing these crises will require system thinking across the three crises as companies reallocate resources, reorientate production, and transform their business models. Given the complexity of the tasks ahead, collaboration between society, governments, organisations, and individuals will be key.