Total Societal
ImpactA 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-forprofit sectors in all regions to identify their highest-value opportunities, address their most criticalchallenges, 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 clientorganization. This ensures that our clients achieve sustainable competitive advantage, build morecapable organizations, and secure lasting results. Founded in 1963, BCG is a private company withmore than 90 offices in 50 countries. For more information, please visit bcg.com.

TOTAL SOCIETAL IMPACTA NEW LENS FOR STRATEGYDOUGLAS BEALROBERT ECCLESGERRY HANSELL
RICH LESSERSHALINI UNNIKRISHNANWENDY WOODSDAVID YOUNG

October 2017 | The Boston Consulting GroupCONTENTS

3

FOREWORD

5

PREFACE

6

EXECUTIVE SUMMARY10INTRODUCING TOTAL SOCIETAL IMPACT13

THE BUSINESS CASE FOR FOCUSING ON TSIThe Imperative of Delivering TSI and TSR
The Business Benefits of TSI

19

ASSESSING THE LINK BETWEEN TSI AND TSR
The BCG Methodology
The Link Between ESG and Financial Performance

24

INSIGHTS ON SOCIETAL IMPACT BY INDUSTRY
Consumer Packaged Goods: Helping Suppliers and Customers
Biopharmaceuticals: Bringing Life-Saving Medicines to Those in
Need
Oil and Gas: Facing the Challenge of Climate Change
Retail and Business Banking: Innovating to Expand Financial
Inclusion
Technology: Expanding Economic and Social Inclusion

33

KEY SUCCESS FACTORS FOR IMPROVING TSI AND TSR

38

A CALL TO ACTION

39
APPENDIX
		 Background and Outputs of Quantitative Analysis
53

NOTE TO THE READER

2 | Total Societal Impact

FOREWORDThe Boston Consulting Group’s study of the impact of environmental, social, and governance (ESG) issues on company performance is an important addition to a growing body of research confirming the financial materiality of these attributes. But it also breaks new
ground in trying to help companies capture the broader societal impactof their core businesses when it comes to global issues, such as drug
availability and affordability, as well as important challenges related toeconomic, financial, and social inclusion. More important, it demonstrates how that approach can benefit total shareholder returns overthe long term by improving margins and valuation multiples. The ideaof a company’s total societal impact (TSI), as the study describes it, andconsideration of all stakeholders are areas many of the world’s largest
institutional investors are increasingly looking to measure and monitor.
As the third-largest investment manager in the world, we have been
managing ESG strategies for more than 30 years.1 Yet as the authors of
this study suggest, we are at the dawn of profound new developments
when it comes to thinking about ESG and impact investing. Investors
have come a long way from the negative screening that characterized
the early forms of what was initially called socially responsible investing(SRI). We have progressed toward positive, thematic ESG tilts such asState Street’s gender diversity and carbon-neutral indexes and are now
focusing on fully integrating ESG issues into our investment risk frameworks and those of our client institutions. That process has relied heavily on the insights and data provided by studies like this one. Efforts toquantify the financial implications of ESG factors help investment managers incorporate them into investment models, both as signals for identifying outperformance potential and as red flags for potential risks.
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 impactof their investment programs. This presents critical challenges for investment managers to come up with new kinds of performance scorecards that include attributes such as the carbon profile of an investment portfolio or scores related to workforce quality and supply chain
sustainability. As the authors point out, many companies are able tomeasure the outcomes directly associated with their core businesses
but have difficulty sizing their ultimate societal impact.
One of the most important preconditions for advancing to this newstage is access to high-quality and consistent data to assess these newfactors when we are analyzing companies. As BCG notes, the ability to
The Boston Consulting Group | 3

measure the impact of environmental issues such as water resource
management or carbon intensity is more advanced than the means ofquantifying the influence of more intangible issues such as purposedriven work cultures or community impact.
Fortunately, many organizations are working to address this data challenge. For example, with its recommended disclosure standards, theFinancial Stability Board’s Taskforce on Climate-Related Financial
Disclosures (TCFD) has provided a foundation for improving our ability to assess and price appropriately climate-related risks and opportunities. Investment managers like us are also encouraging companies
to provide more robust and consistent reporting of environmental, social, and governance issues. As one of the largest ETF and index managers in the world, we have made sustainability issues around ESG acentral focus of our active stewardship practice. Because we arenear-permanent capital (if a company is included in an index, wemust own it on behalf of our clients), we have, by definition, a longterm perspective on how ESG issues can impact a company’s ability
to deliver attractive returns. For that reason, we have called uponcompanies to analyze and report in detail how sustainability issues
might impact their long-term strategy and capital allocation decisions.
The BCG study rightly distinguishes the effects across sectors. The oiland gas industry, as the authors note, will obviously have different opportunities and challenges than biopharmaceuticals, technology,
banking, or consumer packaged goods. We believe more industryspecific and regional-specific research is still needed.
As the report suggests, institutional investors, both asset owners andasset managers, have a crucial role to play in helping to advance thisnext frontier in impact investing. Global institutional assets undermanagement represent trillions of capital firepower to put behind increasing industry knowledge and understanding.
Undeniably, there is a growing appreciation that companies need toconsider the interests of a broader group of stakeholders beyond
shareholders alone, including society as a whole. This, we believe, isthe future. Integrating these issues into corporate strategy can fundamentally change the way businesses think about what makes themsuccessful. As this research vividly demonstrates, successfully managing total societal impact can measurably improve total shareholder returns by motivating employees, building loyalty and trust with customers, and strengthening relationships with policymakers.
—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.

4 | Total Societal Impact

PREFACE

BREAKING THE COMPROMISE FOR
BUSINESS’S CONTRIBUTION TO SOCIETY

A

s the CEO of BCG, I have the privilege of engaging with CEOsaround the world. Most corporate leaders with whom I speakunderstand that business has an opportunity and a responsibility tohelp address major societal challenges.
All too often, however, other demands can take precedence. CEOs today are under enormous pressure on a number of fronts, from transforming 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 andcustomers are gravitating toward companies that operate with a senseof meaning and purpose, the fact remains that CEOs know missing
earnings expectations or losing ground to competitors can come withsevere penalties.
This report provides a much-needed shot of optimism for CEOs struggling with what may feel like conflicting goals. Our research revealed
that, all else being equal, companies that outperform in importantsocial and environmental areas achieve higher valuations and higher
margins. No doubt more research can and should be done. But ouranalysis makes plain that one can develop a robust strategy to deliver
positive contributions to society with confidence that such an
approach will increase enterprise value rather than diminish it.
I believe all firms—including BCG—have a responsibility to explore
how their core business model can be tuned to create a positive societal impact as well as outperform on traditional levers of shareholder
value creation. At BCG, we have been working for more than a decadewith social sector organizations such as Save the Children and theWorld Food Programme to help them improve their effectiveness andamplify their impact. That work will continue. But we can and will domore, including helping our corporate clients understand how they
can leverage their core business to benefit society at large. The evidence is mounting that such an approach will be an important element of both competitive advantage and responsible leadership in
the years to come.
—Rich Lesser
President and Chief Executive Officer, The Boston Consulting Group

The Boston Consulting Group | 5

EXECUTIVE SUMMARY

C

ompanies have long focused on maximizing total shareholder
return (TSR) for investors. Today, under increasing scrutiny from all
stakeholders, companies must also consider their total societal impact. TSI
is not a metric; it is a collection of measures and assessments that capture
the economic, social, and environmental impact (both positive andnegative) of a company’s products, services, operations, core capabilities,
and activities. Adding the TSI lens to strategy setting naturally leads
companies to leverage their core business to contribute to society in a waythat enhances TSR.
BCG conducted a comprehensive study of how companies in five industries—consumer packaged goods, biopharmaceuticals, oil and gas, retailand business banking, and technology—are integrating the pursuit of societal impact into their strategies and operations. Our study included a quantitative analysis of more than 300 companies, using metrics on company performance in environmental, social, and governance—commonly referred toas ESG—topics. We also interviewed in excess of 200 people in more than
20 companies in a range of industries, dozens of investment professionals,
and employees of international development organizations and NGOs.
We found clear links between nonfinancial and financial performance. Ourquantitative analysis showed that nonfinancial performance on certain
ESG topics had a statistically significant impact on company valuations
and on margins. These findings provide a new guidepost to leaders, helping
them identify industry-specific areas where they have the best opportunity
to enhance both TSI and TSR.
Several trends are prompting companies to focus more on theirsocietal impact.

•• Employees, customers, and governments are urging companies toplay a more active role in social and environmental issues such as
global health challenges, climate change, and gender inequality.
There is broad recognition that meeting the UN’s Sustainable

6 | Total Societal Impact

Development Goals will not be possible without the significant
capabilities of and capital from the private sector.

•• Investors are increasingly focused on ESG areas as evidence mountsof the link between performance in those areas and long-term
shareholder returns. In 2016, global assets in the category of socially
responsible investing hit nearly $23 trillion, up from $18 trillion in2014, accounting for more than one-quarter of total managed assets.

•• Data on ESG performance is becoming increasingly available andreliable, putting companies’ actions in those areas under greater
scrutiny, thus reinforcing investors’ attention to them.

Companies that adopt the TSI lens when setting strategy or adjusting their business model reduce the risk of significant negative 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 companies identify and gain access to new locations, markets, andcustomer segments.

•• Adopting the TSI lens can spur innovation, helping companies
identify new product features or attributes that can provide
societal benefits or develop entirely new lower-cost products,
services, and business models.

•• Supply chains that are more inclusive—that draw on historicallyunderrepresented individuals and companies—are more resilientand cost effective because they are less dependent on just a few
suppliers and distributors and raw materials can be sourced closer
to the end market.

•• Companies known for products with positive environmental orsocial attributes, such as those that are responsibly sourced andhave natural ingredients, can inspire customers’ loyalty and trust.
That can translate into increased sales and even premium pricing.

•• A strong track record in positive contributions to society canenergize the workforce and attract and retain talent.

•• Companies that explicitly help a country meet its economic andsocial goals can strengthen relationships with governments,
regulators, and other influential parties.

A quantitative analysis in four industries based on ESG data fromMSCI and Oekom Research (the measures we deemed most relevant for our analysis were not available for technology) revealed
the ESG topics in each industry that are linked to premium valuation multiples.

•• It is important to note that ESG performance does not encompass
all components of TSI—most notably, the intrinsic societal value

The Boston Consulting Group | 7

of a company’s products and services. However, it is the best
available proxy for quantifying societal impact.

•• Most of the ESG topics that were linked to premium valuation

multiples were related to minimizing risks and other negative
impacts, such as health and safety or environmental issues. We
call these downside topics.

•• We found that the top performers for combined performance indownside topics had higher valuation multiples, all else being
equal, than the median performers. The valuation multiple
premium was 11% for consumer packaged goods, 12% for biopharmaceuticals, 19% for oil and gas, and 3% for retail and businessbanking.

We also found a positive relationship between ESG performanceand margins. Our analysis examined margin premiums—the percentage point difference in margins of top performers and of
median performers. In consumer packaged goods, biopharmaceuticals, and oil and gas, we analyzed gross margins and EBITDA
margins (in most cases, the positive relationship showed up in
both—we highlight the margin for which the correlation wasstrongest). In banking, we analyzed net income margins, which isa more relevant metric for this industry.

•• In consumer packaged goods, gross margins were 4.8 percentage

points higher, all else being equal, for companies that were the top
performers in socially responsible sourcing than for the medianperformers. Margins were also higher, all else being equal, for the
top performers in four environmental areas, including minimizing
the impact of products and packaging and conserving water.

•• In biopharmaceuticals, EBITDA margins were 8.2 percentage

points higher, all else being equal, for the top performers in
expanding access to drugs than for the median performers. Top
performers in conducting ethical human clinical trials and promoting employee safety also had EBITDA margin and gross margin
premiums.

•• In oil and gas, EBITDA margins were 3.4 percentage points higher,

all else being equal, for the top performers in maintaining processoriented health and safety programs than for the median performers. There was also a strong link between margins and performance in employee training.

•• In retail and business banking, net income margins were 0.5

percentage points higher, all else being equal, for top performers
in promoting financial inclusion and 3.4 percentage points higher
for top performers in environmentally responsible sourcing. There
were also margin premiums for top performers in three topics
related to ethical business practices: ensuring fair selling practices,
ensuring fair debt collection, and avoiding and combating corruption. There were, however, two negative correlations: top performers in integrating environmental factors into credit risk analysis

8 | Total Societal Impact

and protecting and promoting equal opportunity had lower net
income margins, all else being equal, than the median performers
in those topics.
On the basis of our qualitative analysis and extensive case work,
we have identified eight success factors for companies aiming todeliver both TSR and TSI.

•• Companies need to choose a small and distinctive set of TSI

themes: areas that are relevant to their industry and in which they
can have a meaningful, positive impact.

•• Companies must tell a clear, cohesive story of how TSI is part oftheir core business strategy and of the financial and societal
benefits they expect to achieve.

•• For each TSI area, companies need to select a limited number ofhigh-priority initiatives that are integrated with and driven bybusiness units. Each initiative should be based on a solid, detailed
business and societal case and designed to be scaled.

•• Companies should build deep partnerships with other organizations in order to create large-scale, high-impact initiatives.

•• Companies need clear goals for the societal benefits they plan tocreate, and they must measure their performance against thosegoals as well as the effect of their TSI activities on financial
performance.

•• Companies should also engage directly with key stakeholders—
including employees, customers, and governments—on thesocietal issues that are important to them.

•• The external impact of TSI activities, as well as the effect onfinancial performance, must be integrated into all communications
with investors.

•• A robust TSI program requires the right management structure,
governance, and incentives.

The Boston Consulting Group | 9

INTRODUCING TOTALSOCIETAL IMPACTF

or decades, most companies haveoriented their strategies toward maximizing
total shareholder return (TSR). This focus, thethinking has been, creates high-performing
companies that produce the goods and services
society needs and that power economic growtharound the world. According to this view,
explicit efforts to address societal challenges,
including those created by corporate activity,
are best left to government and NGOs.

Several trends are prompting
corporate leaders to rethink
the role of business in society.
Now, however, corporate leaders are rethinking
the role of business in society. Several trends
are behind the shift. First, stakeholders, including employees, customers, and governments,
are pressuring companies to play a more prominent role in addressing critical challenges suchas economic inclusion and climate change. In
particular, there is recognition that meeting
the UN’s Sustainable Development Goals(SDGs) will not be possible without the private
sector’s involvement. Second, investors are increasingly focusing on companies’ social andenvironmental practices as evidence mounts
that performance in those areas affects returns
over the long term. Third, standards are being
10 | Total Societal Impact

developed for which environmental, social,and governance (commonly referred to as ESG)
topics are financially material by industry, anddata on company performance in these areas
is becoming more available and reliable, increasing transparency and drawing more scrutiny from investors and others.
As these trends gain momentum, companies
need to add a lens to strategy setting, one thatconsiders what we call total societal impact.
TSI is the total benefit to society from a company’s products, services, operations, corecapabilities, and activities. (See the sidebar“What Is Total Societal Impact?”) The mostpowerful—and most challenging—way to enhance TSI is to leverage the core business, anapproach that yields scalable and sustainable
initiatives. If well executed, this approach enhances TSR over the long term by reducing therisk of negative events and opening up newopportunities. In the end, such an approachallows the company to survive and thrive.
Evidence of the power of this approach ismounting. Much of the research to date has
focused on demonstrating the link between
a company’s overall ESG performance and its
financial performance. However, CEOs tell usthat it is unclear where they should put theirenergy. Which areas in their industry provide
the best opportunities to create both societal
benefits and financial returns? To help
answer that question, we have gone deeper

WHAT IS TOTAL SOCIETAL IMPACT?
Every company has positive and negative
economic, social, and environmental
effects on the world. We refer to theaggregate of these as its total societal
impact. TSI is a collection of measuresand assessments, not a single metric.
Companies should use TSI to help shapestrategy.
A company’s TSI includes the impact of its
products and services, its operations, andits corporate social responsibility initiatives. It also includes the result of explicit
decisions the company makes to adjust its
core business to create positive societal
benefits. Activities related to TSI often havea material impact on total shareholder
return (TSR)—but not always.
TSI encompasses numerous elements.
Examples include:•• The intrinsic benefit to society of a

product or service (a drug that saves
lives, for instance, or a bank loan thatenables a farmer to buy a plow)•• Business practices, including strict

adherence to ethical business rules andinclusive hiring policies, that directly or
indirectly affect societies in the countries and communities where thecompany operates

and identified the link between individual
ESG topics and financials in specific industries. Our study encompassed five industries:
consumer packaged goods, biopharmaceuticals, oil and gas, retail and business banking,and technology.1 For individual industries, we
looked at the link between performance in
specific ESG topics (such as ensuring a responsible environmental footprint or promoting equal opportunity) and market valuation
multiples and margins, both contributors to
TSR.2 Our key findings:•• Nonfinancial performance (as captured by
the ESG metrics) was statistically signifi-•• The jobs created as a result of thematerials a company purchases andservices associated with the company’s
supply chain•• The impact on the environment—

both negative (such as the environmental footprint of operations) and positive(such as innovations that reduce
pollution)

Impact is not an easy thing to measure. It
is topic- and industry-specific and often
requires data from outside the company.
Many companies measure the outcomes of
their efforts—but have difficulty measuring
the ultimate societal impact. In the case ofefforts aimed at expanding financial
inclusion for women, for example, it may
be fairly easy to measure an outcome, suchas the number of women who join thebanking system. The impact, on the other
hand, which may be a decrease in genderincome inequality, may be more difficult tomeasure.
No doubt, companies will make progress in
identifying and tracking impact in the
future. The objective, however, is not tocome up with a single metric like TSR but
to understand how a company’s actions
connect to impact and to adjust strategy tomaximize TSI for the benefit of TSR.

cant in predicting the valuation multiples
of companies in all the industries weanalyzed.

•• In each industry, investors rewarded the

top performers in specific ESG topics withvaluation multiples that were 3% to 19%
higher, all else being equal, than those of
the median performers in those topics.

•• Top performers in certain ESG topics had
margins that were up to 12.4 percentage
points higher, all else being equal, thanthose of the median performers in those
topics.

The Boston Consulting Group | 11

ESG data is currently the best way to quantify
a company’s societal impact. However, it isimportant to note that ESG measures are notdesigned to measure a company’s TSI. In particular, ESG provides a limited window onto
the largest impact of a corporation: the intrinsic societal value created by its core products
or services. The ESG measures that do relate
to a company’s products or services tend to
focus on the incremental ways a company improves its products or makes those products
more accessible. In banking, for example, ESG
data is not designed to capture the full economic benefit of a bank’s lending activities—
but it does track the degree to which banks
are lending in underserved markets. Consequently, most of our findings relate to how
companies operate their business, not to theactual product or service they create.
Still, the clear links in each industry between
performance in specific ESG topics and financial performance point business leaders toopportunities to enhance both TSI and TSR.
Notably, we found just two negative correlations in our analysis of 65 topics (we studied
35 topics, 10 of which applied to all four industries)—suggesting that a well-executed investment in material ESG issues does not
hurt financial performance.
Of course, many companies have already developed programs that aim to address various
societal issues and generate business benefits. Examples include efforts to reduce greenhouse gas emissions, programs aimed at eradicating major diseases in developing
countries, and initiatives that provide oppor-

12 | Total Societal Impact

tunities that can lift people out of poverty.
But too often, the results are fragmented andlack scale. Moreover, even companies thathave an effective, large-scale effort intended
to increase both societal impact and TSR frequently fail to measure and communicate theresults to investors, their employees, and thewider public. This diminishes the benefits tothe brand, to employees, and to stock market
performance that companies could realize
from such efforts.
Based on extensive work with clients and numerous interviews, we have identified the key
success factors for integrating TSI efforts into
a company’s strategy, organization, and business model. Companies that do this well willfind they can not only create value for shareholders—but also make a real difference inthe world.

Notes
1. For the purposes of this report, the technology
industry includes software, information, and internetcompanies.
2. Because of the scarcity of data on certain ESG topics
in the technology industry, we were unable to do aquantitative analysis.

THE BUSINESS CASE FOR
FOCUSING ON TSI

T

he business community has, of course,
played a role in addressing societal
challenges for many decades. Companies
have long run their own foundations, forinstance, and have established major corporate social responsibility programs.
Today, it’s not enough for companies to pursue societal issues as a side activity. Instead,they must use their core business—and thescale advantages it offers—to create both
positive societal impact and business benefits. The result can be a more reliable growthpath, a reduced risk of negative, even cataclysmic, events, and, most likely, increased
longevity. (See Exhibit 1.)
BCG conducted a comprehensive study of
how this approach is being adopted in five industries. In addition to our quantitative analysis and a review of external studies, we
spoke with in excess of 200 people at morethan 20 companies both within and outside
our five industries. We also spoke with dozens of investment professionals at pension
funds, foundations, sovereign wealth funds,

Exhibit 1 | Total Societal Impact Cannot Be Separated from the Business
THE CORPORATE SOCIAL RESPONSIBILITY MODEL
Societal impact and shareholder returns
are pursued separately

SHAREHOLDER
VALUE

THE TOTAL SOCIETAL IMPACT LENS
The pursuit of societal impact is integral
to strategy and value creation

SHAREHOLDER
VALUE

SOCIETALIMPACT

SOCIALRESPONSIBILITYCORPORATELONGEVITYCORPORATELONGEVITY

Source: BCG analysis.

The Boston Consulting Group | 13

asset managers, private equity firms, and financial advisors to understand how the investment community is assessing ESG performance and incorporating it into theirdecisions—and what those views mean forcorporate leaders. Lastly, we spoke with international development organizations andNGOs to get their perspective on partnerships with the private sector.

The Imperative of Delivering TSI
and TSR
A company’s significant activities ultimately
have an impact both on society and on shareholder value. Company activities are often
presented in a 2x2 matrix to illustrate howmuch they contribute to each. Following theexample of others who have conducted research in this area, we have created a matrix
that shows the positive and negative impactsof business practices and activities on society
and on financial performance. (See Exhibit 2.)
Assessing How Business Practices andActivities Contribute to TSI and TSR. A
company’s business practices and activities
ideally boost both TSR and TSI, falling in theupper-right quadrant. But placement withinthat quadrant—which reflects just how muchthese activities actually increase TSR and
TSI—varies.
Philanthropy and donations, for example, canbenefit society. But the impact on TSR, typically in the form of brand enhancement or employee engagement, is more variable. Some ofthese activities can enhance both TSI and
TSR, putting them in the upper-right quadrant. But when these activities are not done
well (or are done to excess), they can actually
be a drag on TSR, putting them in the upperleft quadrant. A company may make donations that help society, for example, but do little to burnish its brand or engage employees.
Of course, even if companies apply a strict
TSR lens, they are almost always creatingsome social dividends. That’s because mostcompanies in most industries sell a core product or service—a medicine that saves lives, ahousehold appliance that makes chores easier,or auto insurance that protects drivers against
financial loss, for instance—that has intrinsic
societal value. As a result, their basic operations fall into the upper-right quadrant as well.

Exhibit 2 | All Business Practices and Activities Have an Impact on Both TSR
and TSI

Corporatephilanthropy

Using the corebusiness to makepositive contributions
to society

Creating a productor service that
has intrinsic societal
value
TSI
Externalizing poor
environmental orsocial practices
Practices that
increase risk or resultin 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.

14 | Total Societal Impact

The real question is how companies can identify activities that would fall farther up and to
the right in that quadrant—business opportunities that generate significant shareholder
returns as well as societal impact that goes
well beyond the intrinsic benefit of a productor service. This requires explicitly identifying
ways to leverage the core business to addresssocial and environmental goals. How best to
do so will vary by industry but can include
changes to the supply chain, leveraging corecapabilities of the business, and enhancements to existing products or services or thedevelopment of new ones.
Such activities can have a greater impact thanmost philanthropic efforts for a simple reason:
they are scalable. In addition, while charitablegiving can be among the first things on the
chopping block in an economic downturn, astrategy built around enhancing TSI and TSR
together is likely to be more sustainable because of the business benefits it aims to create.
Certainly, some activities fall in the other three
quadrants, dragging down TSR, TSI, or both.
For example, companies that have focused almost exclusively on delivering solid returns toshareholders have at times failed to invest in
the best environmental practices or safety disciplines. However, societal expectations, regulations, and investors’ attention to social and environmental issues have evolved, making many
previously permitted activities untenable.
Consequently, companies find that activities
that previously boosted TSR in the shortterm, but had a negative impact on society,ultimately become a drag on TSR. As a result,
those activities move from the lower-rightquadrant to the lower left, often damaging
the brand in lasting ways and even threatening the company’s survival.
The degree to which management has focused—and continues to focus—on TSR as
the primary objective varies by region. In
continental Europe, companies have longsubscribed to the “stakeholder model,” inwhich employee, community, and environmental interests are all considered in addition to shareholder interests. This culture has
its roots in an industrial structure dominatedby family-owned enterprises and a regulatoryenvironment for large companies that is morealert to maintaining the balance among these
constituencies than in the US. In Asia, theprevalence of state-owned enterprises andfamily-owned, publicly listed companies creates an environment in which companies are
generally focused on a broader set of objectives than simply maximizing TSR. These objectives can include, for example, supportinga country’s industrial policy.
The Trends Driving an Increased Focus on
TSI. Several trends are converging that makeit critical for all companies to expand theirview to include both TSR and TSI.

Activities that used to boost
TSR but not TSI havebecome a drag on TSR.
First, companies are under mountingpressure from a range of stakeholders to playa more active role in addressing social andenvironmental issues such as global healthchallenges, climate change, and genderinequality. Employees—millennials, inparticular—not only want their employers
to have a greater sense of purpose but alsoseek an active role in companies’ societal
impact efforts. In addition, customers are
increasingly attuned to information related to
a company’s social and environmental
impact—information that can shape theirbuying decisions. Some governments,
meanwhile, expect companies to do more tosolve economic and social problems and arelooking to collaborate with companies insuch initiatives. The need for greater privatesector involvement in these efforts is clear:
the annual gap between the cost of achieving
the SDGs and the available public funding is
projected to be as much as $2.5 trillion—a shortfall that many believe the private
sector must largely address.1
Second, the investment community is increasingly focused on companies’ social and environmental performance. A decade or so ago,socially responsible investing (SRI) encompassed two primary approaches. The first was
The Boston Consulting Group | 15

negative screening, in which investors in public markets avoided stocks of companies
whose products or services were deemed tohave a negative impact on society. The second was impact investing, which involved relatively small investments in the private markets that would support an explicit social orenvironmental objective. These two approaches represented a relatively small sliceof the overall investment market.
Today, however, investing with a focus onsocial and environmental factors is goingmainstream, and investors are deploying
many additional SRI strategies. Examples
include thematic investing (in areas such as
clean energy, education, and health care) andfull ESG integration, in which managers incorporate material ESG measures into theirinvestment models.

The TSI lens leads companies
to spot completely newopportunities.
Global figures reflect the shift. In 2016, global
SRI assets hit nearly $23 trillion, accounting
for more than one-quarter of total managed
assets and up from $18 trillion two years earlier. The overall share of SRI investing varies
quite a bit regionally. In Europe and Australia
and New Zealand, roughly half of all managed assets fell into the SRI category in 2016;
in Canada, the share was nearly 40%. In theUS, the percentage was just over 20%, but it
grew at a compound annual rate of 15% from2014 to 2016. SRI investing has not yet taken
off in Asia, where the share was close to zero.2
Asset owners and asset managers, particularly those with a long investment horizon, arepaying close attention to environmental andsocial factors for a simple reason: evidence ismounting that company performance in ESG
areas has an impact on long-term shareholder
returns.
A third trend that’s moving TSI front and center is the growing availability and reliabilityof ever-more detailed data on company per16 | Total Societal Impact

formance in ESG areas. A variety of standardsetting organizations and data vendors arebehind this trend. Certainly, data challenges
remain. For one thing, consensus is still
emerging on which ESG topics are material
for specific industries and on the appropriate
ways to measure performance in those topics.
And data quality and completeness need improvement. But information today is largely
available and is rapidly becoming more reliable. As a result, companies will find theirperformance on social and environmental issues increasingly under scrutiny.
However, even if a company and many investors believe that societal and business benefits go hand in hand, several realities may
make it difficult for CEOs to take this longview. These include the need to meet quarterly earnings as well as the increasing prevalence of activist investors, who may pressure
the company to boost near-term shareholder
returns at the expense of long-term value creation. In addition, some obstacles prevent
companies from being fully rewarded by theinvestment community for their ESG efforts,such as the way companies and investors
communicate about these issues. (See thesidebar “Bridging the Investor Divide.”)The Business Benefits of TSI
Companies that recognize these shifts and actively rethink how to improve their TSI standto reap concrete business rewards. First, adding the TSI lens drives them to identify andaddress activities that will ultimately destroy
TSR, activities that over time can undermine
a company’s performance and ultimately
even threaten its survival.
Second, the TSI lens leads companies to spot
completely new opportunities—both internaland external. The most prominent include
the following:•• Opening Up New Markets. A strategy

that considers societal impact can give acompany access to new locations and markets, and to underserved customer
segments in existing markets. Partnerships—both with other private-sector
players and with development organizations—often help companies penetrate

BRIDGING THE INVESTOR DIVIDE
There are two main barriers that prevent
publicly listed companies from getting fullcredit in the capital markets for their socialand environmental efforts.
The first is the way companies and investors communicate with each other, whichreflects the bifurcation between ESG andfinancial experts within companies, asset
managers, and asset owners.
In a company, CFOs are focused on financial
results described in well-defined metrics
based on accounting standards. Consequently, they communicate less about ESG
performance and how that performance
affects the company’s financial results. As aresult, conversations with portfolio managers within the asset managers and asset
owners tend not to involve ESG in a majorway, focusing instead on the company’s
financial performance and plans.
Those portfolio managers, meanwhile, do
not typically have ESG expertise. While aseparate group of ESG experts does
communicate directly with companies on
issues these specialists believe are significant, such conversations do not generally
happen in a regular and scheduled fashion.
The second barrier is that asset managers
are typically hired and judged over a
relatively short time frame by asset
owners.1 That creates less of an incentive
to factor in ESG issues, where benefits
often accrue over a long period.
These two barriers can create a vicious
cycle. Many CFOs and investor relations
leaders at companies say investors generally do not ask about ESG factors, giving
them less impetus to develop detailed
information and messages about them.
Investors that do care about ESG, in turn,are often frustrated, arguing that the
information they receive about social andenvironmental efforts and their contribution to financial performance are short on
details and clear measures of success.

Both barriers can be surmounted. For the
first barrier, ESG expertise needs to be
integrated into the company’s financefunction and into investors’ portfolio
management activities. That said, because
companies set the agenda for communications with their investors, it is their responsibility to include ESG issues in thoseconversations. The second barrier needs tobe addressed by asset owners. They must
extend the time frames under which theymeasure asset managers’ performance.
The barriers are not a major issue in theprivate market, however. Private equity
firms typically hold their investments for a
fairly long period, usually five years or
more. In addition, they often get board
seats at the companies in which they
invest, giving them significant influence
over company strategy and the reporting of
ESG performance.
No surprise, then, that a number of private
equity firms we spoke with are integrating
environmental and social factors into thelife cycle of their investing strategy, making
ESG a factor in due diligence and setting
out ESG targets for companies in theirportfolio. This reflects a belief among bothgeneral and limited partners that an ESG
focus can ultimately help increase exit
valuations. And it can help private equity
firms attract more socially minded limited
partners, such as development financeorganizations and foundations.
In the end, the goal for companies is thesame whether their shares are held in the
public or private market: to receive fullvalue for their ESG performance. That will
not be possible unless companies effectively integrate that information in theircommunications with investors.
Note
1. See R. Eccles and M. Kastrapeli, The Investing
Enlightenment: How Principle and Pragmatism Can Create
Sustainable Value Through ESG, State Street, 2017.

The Boston Consulting Group | 17

these markets. Although these newmarkets may not be immediate money
makers, entering them is often a preemptive or strategic move that leads tolong-term, profitable growth opportunities.

•• Spurring Innovation. Companies that

adopt the TSI lens will often identify new
product features or attributes that can
provide societal benefits while boosting
the appeal of those products. In addition,
the TSI lens may lead companies todevelop entirely new lower-cost products,
services, and business models, all of which
can open up new geographic or demographic market opportunities. These
innovations, such as a new businessmodel for an underserved community or a
product that addresses a specific environmental issue, can often be successful inexisting markets.

•• Reducing Cost and Risk in Supply

Chains. The development of more
inclusive supply chains—those that draw
on individuals or companies that havehistorically been left out—can make those
networks more resilient and cost effective
because they are less dependent on a few
suppliers and distributors, and raw materials can be sourced closer to the end
market.

•• Becoming an Integral Part of the

Economic and Social Fabric. Companies
that explicitly work to support a country’s
economic and social development goals
can strengthen relationships with governments, regulators, and other influential
parties.

Companies that are able to seize suchopportunities while addressing potentially
TSR-destroying activities increase thelikelihood that they will grow and thrive overthe long term. Such sustained success isincreasingly difficult to achieve. BCG research
has found that corporate longevity has
plummeted. Public companies have a one inthree chance of being delisted in the next five
years, whether because of bankruptcy,
liquidation, M&A, or other causes. That’s six
times the delisting rate of companies 40 years
ago. (See “Die Another Day: What Leaders
Can Do About the Shrinking Life Expectancy
of Corporations,” BCG Perspective, December
2015.)
Two big questions in C-suites today are whichsocietal impact efforts yield concrete businessbenefits and whether those activities enhance financial performance. We set out toanswer both.

•• Strengthening the Brand and Support-

ing Premium Pricing. Companies known
for products with positive environmental
or social attributes, such as those that are
responsibly sourced and have naturalingredients, can inspire customers’ loyalty
and trust. That can translate into increased sales and even premium pricing
on certain products for certain market
segments, a powerful benefit in particular
for the consumer goods industry.

•• Gaining an Advantage in Attracting andRetaining Talent. A strong track recordin contributing to society can energize theworkforce and give a company an edge inthe ongoing war to attract, engage, andretain talent.

18 | Total Societal Impact

Notes
1. United Nations Conference on Trade and Development, World Investment Report 2014: Investing in the
SDGs: An Action Plan, 2014.
2. Global Sustainable Investment Alliance, Global
Sustainable Investment Review 2016, 2017.

ASSESSING THE LINKBETWEEN TSI AND TSRP

ast research has demonstrated alink between a company’s performancein social and environmental areas and its
financial returns. For example, a 2011 study
showed that companies with good environmental and social policies not only havehigher stock market returns but also performbetter on return on assets and return on
equity than companies that have not adopted
good environmental and social policies.1 In
addition, research published in 2015 foundthat average stock returns for firms with good
performance on material ESG topics are
significantly higher than the returns for firms
with poor ratings.2 And a recent meta studyof over 200 papers revealed that 80% findthat better ESG is linked with better stock
price performance.3
While these studies provide support for thevalue of contributing to society, they do notoffer a blueprint for how companies can actually go about this. To that end, we quantified
the relationship between specific topics andfinancial benefits in four industries to help
companies understand which ESG topics theyshould focus on.4

The BCG Methodology
There is no well-established methodology formeasuring the full economic, social, andenvironmental impact of a company’s
activities on society. We can, however,measure how well companies are performingin ESG topics.
Our first step was to identify the ESG topics
that are most important in each industry westudied. These topics all relate to the companies’ core business models and operations
and concern both the creation of positive
societal impact (such as expanding financial
inclusion in retail and business banking) andthe minimization of negative societal impact(such as reducing waste in oil and gas).

We identified the ESG topics
that are most important in
the industries we studied.
To identify these ESG topics, we gathered extensive input from BCG industry partners, clients, and industry experts. We also drew on
information from many organizations, in particular, the Sustainability Accounting Standards Board (SASB), which has zeroed in on
nonfinancial topics that it considers to be“material”—that is, likely to be of interest toinvestors because they can affect financial
performance. Our list of important ESG topics by industry ultimately included topics
deemed material by the SASB as well as additional topics that BCG believes are important
The Boston Consulting Group | 19

to society, irrespective of their current financial materiality in the industry.
After identifying the right topics, we
determined which we could measure withavailable data. There are a number of sourcesthat measure company performance on these
topics. For this study, we used data fromMSCI and Oekom Research, two of theleading providers of such information. We
then selected for analysis the largest
companies in each industry that collectively
represented at least 80% of the industry’s
market capitalization and for which there
was publicly available data for at least thepast three years. This yielded 39 to 141
companies for each industry.

We found a concrete link
between nonfinancial andfinancial performance.
We then analyzed, by industry, the relationship between nonfinancial (ESG) performance and two key financial variables: valuation multiples and margins (EBITDA margins
and gross margins).5 For banking, we used net
income margin, a more relevant metric forthat industry. Valuation multiples reflect investor sentiment about long-term prospects
and risk, and margins reflect current valueadded. Both are important contributors tocorporate value creation, as reflected in TSR.
The analysis looked at ESG performance andvaluation multiples for 2013 through 2015,
while the margin analysis used data from2014 and 2015.
Our valuation analysis relied on Smart Multiple, BCG’s well-established, proprietary approach for predicting quantitatively the valuation of public companies. (See The 2013
Value Creators Report: Unlocking New Sources ofValue Creation, BCG report, September 2013.)
The Smart Multiple approach uses a multiple
regression model incorporating traditional financial performance measures such as margin levels, growth rates, debt leverage, andcompany size. By adding nonfinancial measures to the Smart Multiple model, we can de20 | Total Societal Impact

termine the incremental impact on valuationof ESG performance, separate from financial
performance. In our margin analysis, we useda similar approach to control for a variety offactors—for example, R&D spending—in order to zero in on the incremental impactof ESG performance.
We did, however, run up against some data
limitations. Metrics for many of the areas onwhich technology companies are focused—such as using their products to improve socialand economic inclusion—are not yet detailed
and nuanced enough to adequately reflect
the variety of emerging business models in
the industry. For that reason, we could not include the technology industry in our quantitative analysis. However for the four industries we were able to analyze—consumer
packaged goods, biopharmaceuticals, oil andgas, and retail and business banking—ESG
data was available for two-thirds of the ESG
topics we thought were relevant. (See the Appendix for more on our methodology.)

The Link Between ESG and
Financial Performance
Our quantitative analysis revealed a concrete
link between performance on specific ESG
topics and both valuation multiples andmargins. We found positive, statisticallysignificant correlations on valuation multiples
for 16 topics and positive, statisticallysignificant correlations on margins for 17
topics out of a total of 65 topics examined
across all industries.6
It is important to note that our analysis does
not prove causality. In fact, in some cases it
may be that higher margins, for example,
allow companies to invest more in ESG
initiatives, resulting in stronger ESG
performance. However, in many cases it islikely that performance in these topics iscontributing to financial performance.
Ultimately, the two factors—strong ESG
performance and strong financial
performance—may be self-reinforcing.
The results of our valuation and margin analyses provide encouragement to companies focusing on ESG-related issues. We expect that
evidence of the positive correlation between

ESG and financial performance will continue
to emerge as data becomes more reliable andavailable and as companies actively pursue
TSR and TSI in tandem.
The Link Between TSI and Valuation Multiples. We found that companies with strong
performance in material ESG topics enjoyeda premium valuation multiple.7
This finding yields a powerful insight. Whileit has long been understood that fundamental financial factors such as margin structures,growth rates, and financial risk are key drivers of valuations, our results show that nonfinancial performance metrics—the ESG
measures—add significant and incremental
information that also affects valuations directly. Factoring in ESG made our valuation
models more accurate. In oil and gas, for example, adding ESG factors to our model increased its predictive power, with nonfinancials explaining 9% of valuation andfinancials 74%. (See Exhibit 3.)
What does all this mean for executives? They
need to know which ESG topics have a positive correlation with valuations in their industry. (See Exhibit 4.)

As we looked at those topics, we noted a pattern: nearly all are related to risks or othernegative impacts that are particularly relevant in certain industries. Examples include
ensuring a responsible environmental footprint and maintaining robust occupationaland safety programs. We call these downside
topics. The remaining topics are upside opportunities, optional activities that can generate revenue. Nearly every one failed to show
a positive correlation to valuations.
We aggregated all downside topics and analyzed their combined connection to valuation
multiples.8 This revealed a linear, positive relationship between ESG performance andvaluation multiples. To give a sense of theconnection, we examined the difference invaluation multiples between top performers
and those at the median for the entire groupin the ESG topics. We defined top performers
as those companies at the median of the top
quintile (the 90th percentile).
In all four industries, top performers for combined performance in all downside topics had
market valuation premiums relative to themedian performers in those topics. This premium was 11% for consumer packaged goods,

Exhibit 3 | Nonfinancial Metrics Contribute to the Accuracy of BCG’s Valuation Model
BCG’s SMART MULTIPLE ANALYSIS OFOIL AND GAS VALUATIONSIMPACT OF FINANCIAL AND NONFINANCIAL
METRICS ON OIL AND GAS VALUATIONS

Actual multiple

Explanatory power (%)

100
17

Adjusted R2 = 0.83

9

Adj R2 = 0.83
80

60

74

40

20

0
Predicted multiple

Unexplained

Nonfinancial metrics

Financial metrics
Sources: S&P Capital IQ; Oekom Research; MSCI; BCG Value Science Center.

The Boston Consulting Group | 21

Exhibit 4 | Higher Valuations Are Linked to Strong Performance in Certain ESG Topics

CONSUMER PACKAGEDGOODSBIOPHARMACEUTICALSOIL AND GASRETAIL AND BUSINESSBANKING• Conserving water• Avoiding and combating
corruption• Avoiding and combating
corruption• Ensuring a responsible
environmental footprint• Conducting ethicalhuman clinical trials• Maintaining processoriented health andsafety programs• Integrating environmental
factors into credit risk
analysis• Reducing impact on
biodiversity, water, andecology• Securing business andpersonal data

• Ensuring a responsible
environmental footprint• Implementing a foodsafety management
program• Preventing mistreatmentof animals• Promoting employee
safety• Promoting transparent
lobbying• Protecting and promoting
equal opportunity• Socially responsible
sourcing

Sources: Oekom Research; MSCI; SASB; BCG analysis.
Note: ESG = environmental, social, and governance.

12% for biopharmaceuticals, 19% for oil andgas, and 3% for retail and business banking.
So, why would we see a correlation withdownside topics but not upside opportunities? The downside topics are well known
and so, not surprisingly, relatively good
metrics have been developed to measurethem. The upside opportunities, in contrast,
tend to be newer concepts for which therelevant metrics might be difficult to collector of weaker quality. If a bank aims toincrease financial inclusion, for example,
what would be the most meaningful measure
to track that? It is possible that given thechallenges of measuring upside
opportunities, investors are not able tointegrate them effectively into valuations.
The Link Between TSI and Margins. We
found a positive correlation between margins
and both upside opportunity and downside
ESG topics in consumer packaged goods,
biopharmaceuticals, oil and gas, and retailand business banking. In our analysis, we
examined margin premiums—the percentage
point difference between margins for top
performers in ESG topics and median per22 | Total Societal Impact

formers. In oil and gas, for example, if median performers in the health and safety topic
had an EBITDA margin of 30%, our analysis
showed that the EBITDA margin for top
performers in that topic—all other things
being equal—was 33.4%. (See Exhibit 5.)
In most cases, for consumer packaged goods,
biopharmaceuticals, and oil and gas, the positive relationship showed up in both EBITDA
and gross margins. For the purposes of the industry discussions that follow below, we highlight the measure for which the correlation
was strongest.
It is not difficult to understand why strong
performance in the downside topics would
contribute to higher margins. Many of them
are related to practices that can lower costs,
such as the reduction of water and energy
use and minimizing the likelihood of a catastrophic operating incident.
While performance in many upside opportunity topics may not yet be rewarded by investors (as reflected in our valuation findings), it
can have a direct effect on performance byhelping a company create a sustainable com-Exhibit 5 | Margin Premiums Are Linked to Strong Performance in Certain ESG Topics

CONSUMER PACKAGEDGOODSBIOPHARMACEUTICALSOIL AND GAS• Conserving water
3.1 pp EBITDA
5.5 pp Gross Margin• Conducting ethicalhuman clinical trials
6.1 pp EBITDA
6.3 pp Gross margin• Maintaining
process-oriented healthand safety programs• Ensuring a responsible
environmental footprint
1.3 pp EBITDA
3.3 pp Gross margin• Limiting negative effects
on biodiversity andecology
3.0 pp EBITDA• Minimizing impact of
products and packaging
4.1 pp EBITDA
12.4 pp Gross margin• Expanding accessto drugs
8.2 pp EBITDA
6.7 pp Gross margin• Promoting employee
safety4.6 pp EBITDA
4.8 pp Gross margin• Promoting transparent
lobbying
5.1 pp EBITDA• Promoting employee
safety3.4 pp EBITDA• Supporting ongoing
employee training
8.2 pp EBITDA
6.3 pp Gross margin

RETAIL AND BUSINESSBANKING• Avoiding and combating
corruption
2.3 pp Net income margin• Ensuring fair debt collection
0.5 pp Net income margin• Ensuring fair selling practices
0.4 pp Net income margin• Environmentally responsible
sourcing
3.4 pp Net income margin• Promoting financial inclusion
0.5 pp Net income margin

3.3 Gross margin• Socially responsible
sourcing
4.8 pp Gross margin

Sources: Oekom Research; MSCI; SASB; BCG analysis.
Note: ESG = environmental, social, and governance. Figures represent the average margin premium (in percentage points) of top performers (90thpercentile) in the specific ESG topic compared with median performers (50th percentile), all else being equal.

petitive advantage over rivals. A more inclusive supply chain, for example, can help acompany attract a broader, more socially conscious customer base.

Notes
1. R. Eccles, I. Ioannou, and G. Serafeim, “The Impact ofCorporate Sustainability on Organizational Processes
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, “WhyCompanies That Do Good May Be the Best Performers.”

5. EBITDA (earnings before interest, taxes, depreciation,
and amortization) margin is EBITDA divided byrevenue; gross margin is gross income divided byrevenue.
6. We looked at ten ESG topics that applied to all fourindustries and at industry-specific topics: five in retailand 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
for those top performers would be 12x.
8. This includes downside topics for which we did not
find a correlation individually.

The Boston Consulting Group | 23

INSIGHTS ON SOCIETAL
IMPACT BY INDUSTRYOur quantitative analysis reveals thepower of a focus on ESG. So, what ESG
areas are linked to financial performance,
and what are individual companies doing in
those areas? Here we address those questions
for each industry in our analysis. For the
purposes of this report, we examine company
activities related to topics where our analysis
found a quantitative link—and a few where
we did not.

goods industry found links between performance in certain ESG topics and both valuations and margins:

A number of ESG topics are common acrossindustries. Efforts to support diversity and to
reduce the environmental impact of a company’s operations, for example, are relevant formost corporations in all the industries westudied. In addition, there are some less obvious areas—most notably, efforts to addresshumanitarian crises—that are applicable tomultiple industries. (See the sidebar “Business to the Rescue.”) More often, however, areas where companies have the most leverage
to deliver societal and business impact are
distinct to their industries.

•• Margins. Gross margins were 4.8 percent-Consumer Packaged Goods:
Helping Suppliers and Customers
The opportunity for consumer packaged
goods (CPG) companies to have a positive impact on society exists in all elements of theiroperations, from sourcing to manufacturing
to the types of products they sell. Our quantitative analysis of the consumer packaged
24 | Total Societal Impact•• Valuations. The 11% valuation premiumfor top performers in all downside ESG
topics was due to three of those topics:
implementing a food safety management
program, conserving water, and ensuring a
responsible environmental footprint.

age points higher, all else being equal, for
top performers in integrating social
factors into sourcing and procurement
than for median performers and 3.3
percentage points higher for top performers in promoting employee safety. Margins
were also higher, all else being equal, for
top performers in four environmentally
related areas—ensuring a responsible
environmental footprint, limiting negative
effects on biodiversity and ecology,
minimizing the impact of products andpackaging, and conserving water.

The importance of environmental issues for
CPG companies was apparent in both our valuation and margin analyses. Why would thisbe? On the valuation side, investors are likely
recognizing that consumers are gravitating toward companies with a strong environmental
track record. When it comes to margins, theconnection may be related to two factors.

BUSINESS TO THE RESCUE
Addressing humanitarian crises—whether anatural disaster, a flood of refugees, or a major health threat like the Ebola outbreak—cannot be a reactive endeavor. A comprehensive approach focusing on preparedness,
response, and recovery is required. Historically, such efforts have been spearheaded
by governments, the United Nations(through its Office for the Coordination of Humanitarian Affairs), agencies like the World
Food Programme, and NGOs such as Save
the Children. While some companies, such as
logistics providers, have been deeply involved
in disaster preparedness and response, therole for most private-sector companies has
been limited to writing checks to fundefforts by governments and NGOs.
That is changing. Companies are increasingly bringing their knowledge, skill set, andassets to bear on some of the most pressing humanitarian crises around the globe.
Airbnb, for example, made a bold pledge inearly 2017 to arrange short-term housing for
100,000 people in need over the next five
years, including refugees, disaster survivors,
relief workers, and other displaced people.
The company has already provided homesduring almost 50 global natural disasters tothousands of people. These efforts have not
only provided visible social value but also
have helped grow the business—almost
50% of hosts who join the platform during
these disasters were not previously registered with Airbnb—and improve thecompany’s standing with government
leaders. For example, in Florida, ahead of
Hurricane Irma in September 2017, Governor Rick Scott encouraged evacuees to find
free accommodations on Airbnb throughthe company’s disaster relief tool.
DHL, meanwhile, has created a series ofdisaster response teams. The sudden influxof supplies and aid can be overwhelming
after a natural disaster, making it difficult
to get those things to people who needthem. DHL is able to use its logistics
expertise—on a pro bono basis—to help solve that problem. After a devastating cyclone hit Fiji in 2016, DHL organized the logistical handling of all the relief
supplies that came into Walu Bay or
Nausori Airport and provided Fiji’s National
Disaster Management Office (NDMO) andNGOs with an accurate count of what aid
was available and where.
In many cases, private-sector companies inan affected region are uniquely equipped torespond to a disaster given their on-theground presence. Consider steel and mining
company ArcelorMittal, which has long
invested in preparedness by tracking andmonitoring potential risks to its operations
and workforce around the world. During theEbola crisis, which peaked in 2014, thecompany stepped forward to partner withthe response agencies. It conducted Ebola
initiatives focused on community awarenessand screening and used its machinery andcapacity to construct treatment centers. In
addition, the company’s leadership wasinstrumental in organizing in-country
companies into a coalition called the Ebola
Private Sector Mobilisation Group (EPSMG),
which eventually included over 80 companies. This group shared information internally and became a single point of contact
for the public sector. The coalition, with its
long-term presence and commitment in theaffected countries, became a powerful voice
to governments on shaping policies in the
midst of the crisis that supported rapid
response and long-term recovery.
Coalitions like the EPSMG can amplify the
impact of the private sector by bringing
companies together. In the Philippines andNigeria, company networks have been
extremely valuable in responding to natural
disasters. The UN, under the Connecting
Business initiative, is seeking to support thecreation of such national-level private-sector collective action around the world. Suchmoves will allow companies to leverage
their scale in addressing major global
crises, generating rewards both for thecompanies involved and for society at large.

The Boston Consulting Group | 25

First, some companies with a strong environmental record have been able to sell products
at a price premium. Second, companies thattake steps such as minimizing packaging
waste or water use often lower their costs inthe process.
Global CPG player Unilever sees tacklingpackaging waste as a key challenge—andopportunity. The company points out that by
2050, it is estimated that there will be more
plastic than fish in the world’s oceans. And
given that the company purchases more than
2 million tons of packaging every year,
Unilever recognizes it needs to be part of thesolution.

Steps such as minimizing
packaging waste and wateruse often lower costs.
That’s why in 2010 the company committed
to halve the waste associated with the disposal of its products and to increase recycling
rates in key markets. Furthermore, Unilevercommitted to make all the company’s plastic
packaging fully reusable, recyclable, or compostable by 2025 and to increase the use ofrecycled plastic content in its packaging to atleast 25% by 2025. Unilever notes that this is
not only the right thing to do environmentally, but the business case for action is clear.
Since 2010, the company has reduced its
waste footprint per consumer by 28%, saving
millions of euros in packaging costs across theportfolio annually. At the same time, Unileversays such efforts promote topline growth byappealing to the more than 50% of consumers
who, research has shown, prefer brands thatare responsible with their use of natural resources.
Companies in our analysis that integrate social issues into sourcing and procurement decisions also enjoyed a sizable margin benefit.
The existing ESG measures in this area focus
on working conditions and labor rights.
Many companies that have strong records inthose areas have begun taking a more expan26 | Total Societal Impact

sive view, evaluating the full range of challenges and needs in their supply chains. This
includes everything from how small suppliers, such as farmers, can earn a living wage to
how to create greater community support
and financial empowerment for suppliers.
Given the size and scale of the supply chainsof large CPG companies, efforts in these areas
can have a real impact on economic development in regions where the company sources.
At the same time, it can make the company’s
supply chain more resilient and cost effective
because it is less dependent on just a few
suppliers and distributors and raw materials
are sourced closer to the end market.
For PepsiCo, a reliable agricultural supply
chain is critical to ensuring a consistent flowof high-quality raw materials. The company
has made significant moves to strengthen its
agricultural supply chain in ways that help
farmers produce more and earn more in theprocess, while respecting human rights andprotecting the environment. The company
plans to expand its Sustainable Farming Initiative, an industry-leading program that promotes agricultural best practices, increased
yields, and workers’ rights, to reach morethan 7 million acres by 2025, which collectively represents 75% of the company’s agricultural spending. This protects a critical part ofPepsiCo’s global supply chain while helping
to solve important economic, environmental,
and social issues.
As part of the initiative, the company has developed a robust potato growing program inIndia, for example, that provides training tofarmers, in part through a team of agricultural experts. The training, aimed at helping
farmers grow the specific potatoes needed for
the Lay’s product line, covers topics such as
the ideal distance between planted rows ofpotatoes. In addition, PepsiCo announces theprices it will pay for potatoes ahead of thegrowing season, allowing farmers to better
plan, manage costs, and earn a sustainable
income. The company uses its Sustainable
Farming Initiative in 33 countries to datewith growers on farms of all sizes, with varied
crops. This effort pays real dividends for
PepsiCo, guaranteeing access to high-quality
raw materials in many locations and thus
making the supply chain more resilient.

For certain ESG topics, our analysis of the consumer packaged goods industry did not find alink between ESG performance and financials
where we would have expected to find one.
Consider the work many leading food companies have done to improve the nutritional andhealth attributes of their product portfolio.
The pressure from regulators and investors
for food companies to address this issue continues to intensify. But our analysis did notshow a correlation with valuations or margins.
This might be because consumer packaged
goods includes nonfood companies and oursample is primarily large publicly listed players. It is possible that correlations would
emerge in an analysis with a narrower industry definition or one that looked at smaller
companies that focus on healthy foods.

Biopharmaceuticals: Bringing
Life-Saving Medicines to Thosein NeedFor the biopharmaceutical industry, the connection to societal impact is clear and direct.
The industry’s products improve humanhealth and save lives. And the astounding
medical advances driven by the biopharmaceutical industry over many decades have
revolutionized health care. But that progresshas presented challenges as well—most notably, how to ensure that life-saving medicines
are accessible to as many people as possible,
including those who cannot afford to pay forthem. This issue is so critical that it is a major
element of one of the UN’s SDGs.1
Our quantitative analysis of the biopharmaceutical industry found links between performance in ESG topics and both valuations andmargins:•• Valuations. The 12% valuation premiumfor top performers in all downside ESG
topics was due to seven topics, including
conducting ethical human clinical trials
and avoiding and combating corruption.

•• Margins. EBITDA margins were 8.2

percentage points higher and grossmargins were 6.7 percentage points
higher, all else being equal, for top
performers in expanding access to drugs
than for median performers. In addition,

top performers in conducting ethicalhuman clinical trials and promoting
employee safety had EBITDA margin andgross margin premiums. And top performers in promoting transparent lobbying had
an EBITDA margin premium.

For biopharma, theconnection to societal impact
is clear and direct.
The valuation findings reflect the likelihoodthat companies with stellar records in humanclinical trials and combating corruption tend
to do well in controlling risk. In addition,companies that are known for excellence in
R&D tend to adhere to the highest ethicalstandards in conducting human clinical trials.
Such excellence is likely to be a key factor inboth our valuation and margin findings.
The largest margin premium we saw was
linked to expanding access to medicine. But
determining cause and effect here is particularly difficult. Making products accessible indeveloping markets can, for example, drive
valuable innovations, including changes inmanufacturing and product technologies that
ultimately lower costs. However, industry observers point out that margins tend to be lower in emerging markets and that the causality
may go in the other direction: companies withhealthy margins have more flexibility to invest
in expanding into new, developing markets.
Determining causality is also difficult because
it is challenging for companies to determine
the true cost of serving a developing market
and to allocate resources appropriately.
For decades, companies have expanded access to medicine largely through donation
programs. But increasingly, many are looking
for ways to leverage the core business more
directly to achieve that goal. Merck, for example, is harnessing its manufacturing operations and supply chain to make some criticaldrugs more accessible.
The company launched a program in 2010
with a goal of making its products accessible
The Boston Consulting Group | 27

to 80% of the world’s population. The company employed a number of levers to achievethis. Some, such as deploying technologies
like enzymatic bio-catalysis to improve costs
and yield, had direct application to the global
business. Others, such as improving the efficiency of procurement through localized
sources of supply, could be more directly targeted at specific products and markets. Overall, these actions aimed to reduce manufacturing costs, improve yield, and create moreenvironmentally friendly manufacturing processes. Additionally, Merck has made changes
in packaging, distribution, and storage in developing markets to ensure that its products
can reach patients in those markets. Such investments have allowed the company to expand the availability of products in developing markets, a necessary condition for
meeting its accessibility goals.

Oil and Gas: Facing the Challengeof Climate Change
Oil and gas companies face a significant challenge to their traditional business modelfrom climate change. The industry’s attention
to this issue reflects an intensifying focus on
climate from large investors, some of which
are pressuring oil and gas companies to adjust the value of their reserves to reflect potentially stranded assets. As countries aroundthe world commit to limit global temperature
increases, some oil and gas reserves may never be developed. In addition, a recent taskforce led by Michael Bloomberg recommended that companies should disclose climate
risk information in their public filings.
Our quantitative analysis of the oil and gas
industry found links between performance in
ESG topics and both valuations and margins:•• Valuations. The 19% valuation premiumfor top performers in all downside ESG
topics was due to three topics: maintaining process-oriented health and safety
programs; reducing the impact on biodiversity, water, and ecology; and avoiding
and combating corruption.

•• Margins. EBITDA margins were 3.4

percentage points higher, all else being
equal, for top performers in maintaining

28 | Total Societal Impact

process-oriented health and safety
programs than for median performers.
There was also a strong link between
margins and performance in supporting
ongoing employee training.

It is hardly a surprise that
health and safety issues arelinked to higher valuations.
It is hardly a surprise that health and safety
and environmental issues are linked to higher
valuations. Minimizing accidents and environmental damage, after all, is a well-understood factor in shareholder returns. At thesame time, a top-tier health and safety record, as well as solid employee training, islinked to a clear boost in margins. Companies
that excel in both areas are more likely to
avoid long and expensive disruptions from
accidents or other negative events.
Given the importance of climate change, it isnotable that we did not find a link between oil
and gas companies’ efforts to address climatechange and financial performance. Our analysis examined two measures in this area—investing in alternative energy and minimizing
carbon intensity in reserves—and found noconnection to either valuations or margins.
This is understandable. Investments in alternative energy programs and the resulting revenues are both very small compared with investments in and revenues from oil and gas
exploration. And the ultimate impact of reduction of the carbon intensity of reserves on valuations remains unclear given the uncertaintyof policies, such as potential carbon taxes.
This will become clearer over the long term.
Despite the complexity surrounding the climate change challenge, some companies aretaking action. Total, for example, has been integrating climate change into its decision
making since 2000. The company made several significant changes to its strategy, including
reducing oil and increasing natural gas in its
portfolio, exiting the coal business in 2015,
and increasing R&D and pilot projects in CO2
capture and storage.

This effort has required some difficult decisions. When faced with the opportunity to
pursue a very profitable coal-related projectin China, for example, Total first attempted tomake the project more sustainable. Ultimately, however, the company abandoned the project altogether, deciding it was incompatible
with its commitment to move away from coal.
We did not find a correlation between externally facing social areas, like community involvement, and either valuations or margins.
This may be because data on community activities is difficult to track, particularly given
the many communities in which oil and gas
companies operate.
Measurement issues aside, oil and gas companies have long recognized the importance ofcommunity relations to the success of thebusiness. They often operate in remote, lessdeveloped regions, where their business practices, including safety, compliance, and sourcing, have significant implications for the local
population. And they often work with local
governments and other groups to support thedevelopment of local businesses that can become suppliers to the company.
In addition, there is an opportunity forforward-looking companies to support national-level initiatives. This can take many forms.
Companies can help governments determine
how best to use the funds they receive fromenergy revenues—to help develop national infrastructure or the education system, for example. They can also contribute expertise to governmental economic development programs.

Retail and Business Banking:Innovating to Expand Financial
Inclusion

The role of financial institutions, includingbanks, is to finance the real economy. The tremendous growth in the financial sector overthe past couple of decades, however, has
highlighted that some in the industry haveshifted away from that role. The result has
been the development of ever-more-complex
financial instruments and greater risk, which
contributed significantly to the financial crisisof the past decade. In addition, companyspecific scandals involving retail banking cus-

tomers have further eroded trust in the industry. As a result, many banks are now realizingthat a renewed effort to make positive contributions to society can help rebuild their own
and their industry’s standing.

Many banks realize that
contributing to society canrebuild the industry’s standing.
•• Valuations. The 3% valuation premiumfor top performers in all downside ESG
topics was due to three topics: securingbusiness and personal data, ensuring a
responsible environmental footprint, andintegrating environmental factors into
credit risk analysis.

•• Margins. Net income margins were 0.5

percentage points higher, all else being
equal, for top performers in promoting
financial inclusion and 3.4 percentage
points higher for top performers in
integrating environmental factors into
sourcing and procurement. There werealso margin premiums for top performers
in three topics related to ethical businesspractices: ensuring fair selling practices,
ensuring fair debt collection, and avoiding
and combating corruption. There were,
however, two negative correlations: top
performers in integrating environmental
factors into credit risk analysis andprotecting and promoting equal opportunity had lower net income margins, allelse being equal, than median performers
in those topics.

The connection between valuations and securing business and personal data is fairly obvious given that such protection is now considered table stakes in an age of more
frequent cyberattacks.
Some of the other links we found, however,are more complex. Consider the connection
between valuations and the integration of environmental factors into credit risk analysis.
This correlation indicates that investors recognize that borrowers with poor environmenThe Boston Consulting Group | 29

tal practices can be higher credit risks and are
rewarding banks that factor this into theirlending with higher valuations. However, this
topic had a negative correlation with margins,indicating that near-term financial performance may take a hit when banks factor environmental issues into lending decisions andthus forgo loans that are profitable in the
short term.

Banks have an opportunity
to influence the projects theyfinance.
Not all banks, however, are suffering negative
effects from such practices. Spurred in partby several shareholders and environmentalgroups, PNC decided in 2015 to reduce its
lending to coal-mining companies, particularly those involved in mountaintop removal
mining (MTR). Since then, PNC has continued to reduce its exposure to coal mining andnow prohibits lending to coal producers withanything more than a minor exposure to
MTR. While the business predicted a small
financial hit, its decision ended up being agood economic move, reducing risk in its
portfolio and bringing in some new clientsthat embrace the new policies. A supportive
board of directors, as well as a strong risk
committee that understood how to integratesocial and environmental issues into longterm risk assessment, helped PNC make astrategic move that has paid off.
Of course, banks can go beyond just saying
yes or no to borrowers on the basis of theirenvironmental or social practices. We thinkbanks have a real opportunity to influence
the projects they finance. They can, for example, provide insight to borrowers on bestpractices in social and environmental issues
and encourage those borrowers to adopt suchapproaches.
The positive correlation we found between
promoting financial inclusion and margins
may reflect recent advances. In the past,
many banks considered expanding service offerings to unbanked or underbanked groups
30 | Total Societal Impact

to be a cost of doing business in order to comply with government mandates. More are
now looking at this as an opportunity, as new
financial technology (fintech) solutions andpartnership models make it easier to profitably offer affordable financial products andservices to underserved groups.
At the same time, such activities can yield
meaningful social benefits. BCG’s 2016 Sustainable Economic Development Assessment(SEDA) found a concrete connection between
a country’s level of financial inclusion and its
overall well-being. (See The Private-Sector Opportunity to Improve Well-Being, BCG report,
July 2016.)
To expand financial inclusion and derivebusiness benefits, banks must get creative.
And they need to adapt their approach to theregulatory environment and market dynamics in the locations where they operate.
Consider Standard Bank. In South Africa, under the government program known as Enterprise Development, banks must direct 0.2% of
their profit to support black-owned small andmidsize enterprises (BSMEs). That requirement is generally met simply by making donations or grants to black entrepreneurs or
BSMEs. Standard Bank, however, has taken adifferent approach. The bank invested a portion of the money into an independent trust
to be used as collateral for loans to aspiring
black entrepreneurs, none of whom would
have qualified for loans. The bank used otherenterprise development funds to provide support to those businesses, such as technical advice and services. This approach allowed thebank to provide business loans to a larger
number of BSMEs and to help improve theperformance of those businesses. Moving forward, Standard Bank plans to expand parts of
the BSME financing model to other SMEs.
(For more information on financial inclusion,see Improving Financial Inclusion in South
Africa, BCG Focus, April 2017.)
Bank margins were also bolstered by a strong
track record in ethical business practices. It is
likely that such actions not only protect thebank brand but also reduce costs. Fair selling
practices, for example, can lower customer attrition rates and minimize fines because thebank is not selling inappropriate products to
its customers. Fair debt collection, meanwhile, can also reduce customer attrition.
And banks that avoid and combat corruption
are likely to face lower costs related to fraud,
including lawsuits and government penalties.

main hotel districts of the cities where thecompany operates. The company’s activities
also provide economic benefits to hosts thatneed it: 62% of US Airbnb hosts say that hosting helped them pay their mortgages andhence stay in their homes.

In addition to the negative correlation noted
above related to integrating environmental
factors into credit risk analysis, we also saw anegative correlation between performance inprotecting and promoting equal opportunityand net income margins. It is possible thatsuch efforts may be associated with investments in the short term, which affect margins.

Mastercard’s partnership with SASSA (South
African Social Security Agency) is a prime example of how a technology platform can support societal inclusiveness.2 The partnershipprovides social security payments electronically through a biometrically authenticatedcard. The program not only increased financial inclusion in South Africa from 67% to
75% in the first year but also slashed government costs by $375 million over five years,
strengthening the company’s government relations. At the same time, the program
demonstrated the power of a business modelthat can be tailored to other markets.

Technology: Expanding Economic
and Social Inclusion
In our interviews, it was clear that technology
companies often view their core business as
making dramatic contributions to the overall
good of society. A number of online platforms, for example, give people in remoteareas access to information and to global
marketplaces, a development that supports
economic inclusion and equity.
We were unable to analyze the relationshipbetween ESG performance and financial performance, as we did for the other four industries, because of data challenges. In particular, data is not currently tracked for a numberof the areas in which we believe technology
companies can have a significant societal impact. This may be in part because businessmodels vary so dramatically in this industry.
As a result, a fixed set of data that is relevant
for all technology companies is much harder
to identify than for, say, banks.
Despite such issues, our study highlighted
technology companies’ strong commitment tomaking a positive societal impact. Perhaps
their most compelling opportunity is to promote social and economic inclusion among
marginalized and underserved groups. Given
the wide variety of business models, theroutes to achieving that can vary considerably.
Airbnb, for example, is helping to draw tourism dollars into neighborhoods that wouldn’t
ordinarily attract visitors. In fact, about 74%
of Airbnb listings are located outside theOnline platforms can
support economic inclusionand equity.
Facebook, meanwhile, says that it iscommitted to ensuring that every person canparticipate in the global digital community,
regardless of their location, socioeconomic
status, or physical limitations. The company
builds innovative tools to connect them,including Free Basics, which offers services
via smartphones in countries where internet
access may be prohibitively expensive formany people. The services, which include
content on news, employment, health, andeducation are available for free without data
charges through a partnership with local
telecommunications companies. Free Basics
has launched in more than 65 countries andprovides more than 1,000 services worldwide.
The company also built Facebook Lite, aversion of Facebook for people with lowbandwidth internet. Today 200 million
people around the world use Facebook Lite
to connect.
Microsoft, for its part, is focused on a major
inclusion issue in the US: internet access. The
The Boston Consulting Group | 31company recently announced its Rural Airband Initiative in support of bringing broadband access to 23 million people in the rural
US. As part of that initiative, Microsoft proposed an ambitious goal for the nation: toeliminate the rural broadband gap by July 4,2022. Microsoft believes that hitting this goal
will require a mix of technologies, including
fiber, fixed wireless, satellite, and TV whitespaces (a technology that leverages unused
spectrum in the UHF television bands). Microsoft will provide seed capital to companies
that are deploying and developing TV whitespaces technology with the aim of connecting

32 | Total Societal Impact

2 million rural Americans to broadband. The
company will also contribute its relevant patent portfolio, free of charge, to organizations
investing in and using the TV white spaces
technology.

Notes
1. United Nations Development Programme, Goal 3:
Good Health and Well-Being.
2. Mastercard is included here because its core businessis digital payment technology.

KEY SUCCESS FACTORS FOR
IMPROVING TSI AND TSR

Companies have long designed theirstrategies and business models tomaximize TSR. While many companies now
have clear objectives related to increasing
their contribution to TSI, most have notrevamped their strategies and tuned theirbusiness models to include TSI objectives.
Drawing on client work and our research, wehave identified eight success factors for making this shift. Few, if any, companies—even
extremely well-run companies—are best inclass in all of these factors.

to review its overall societal impact
agenda. As a result, Visa is moving awayfrom a large number of fragmented
activities and a wide range of small-scale
partnerships to a focus on an anchor pillar
that aligns closely with the company’s
mission and philosophy of societal change.
This pillar, focused on the financial
empowerment of microenterprise owners,
will not only become the core platform forthe foundation and much of Visa’s othercorporate philanthropy efforts, but will
also include business initiatives aimed atcreating societal and business value. Visa
and Visa Foundation will now pursue only
a few activities, but at global scale andwith a few highly credible partners.

1. Understanding Where You Are Today—
and Where You Need to Go. Companies
must fully understand the total societal
impact of their products and services, andthey must determine where they canmake additional positive contributions.
All too often, companies focus on areasthat are not clearly connected to theirbusiness—consider a bank that supports
efforts to rid oceans of plastic waste. As aresult, they have less impact and lesscredibility than if they target areas where
they have expertise and unique resources.
Companies need to choose a small anddistinctive set of TSI themes, areas thatare relevant to their industry and where
they can make meaningful contributions.

2. Creating a Cohesive Narrative. After
identifying the right themes, companies
must tell a clear, cohesive story of how TSI
is integrated into their corporate andbusiness strategies. It is hard for stakeholders, whether employees, customers,
investors, or governments, to understandwhat the company is doing without such anarrative. When companies are able to tella consistent and credible story about theirsocietal impact efforts, they are more
likely to get credit for them from thosestakeholders.

When Visa announced the launch of its
foundation, in 2017, the company decided

3. Building a Portfolio of Scalable Initiatives
Leveraging the Core Business. For each
The Boston Consulting Group | 33

area on which a company focuses, it needs
to select a limited number of high-priority
initiatives that are integrated with anddriven by the company’s business units.
Each should be based on a solid, detailed
business and social impact case anddesigned ultimately to reach scale.
This last point is critical. A company’s TSI
efforts and aspirations should be commensurate with its scale and reach. If these
efforts center on a large number of
disparate projects, they may not reachscale—and therefore won’t move theneedle much on societal issues or thebottom line.

A company’s TSI aspirations
should be commensuratewith its scale and reach.
Facebook has effectively built a portfolio
of initiatives around a clear narrative.
Mark Zuckerberg’s 2017 letter, “Building
Global Community,” laid out a clear visionof how Facebook should drive societal
impact. The company’s goal, Zuckerberg
wrote, should be to “develop the social
infrastructure to give people the power tobuild a global community that works forall of us.” He also spelled out how Facebook should go after that goal by focusing
on five pillars, including safe communities,
civically engaged communities, andsupportive communities. These pillars
directly shape how business unit leadersdevelop new products and services.
Facebook’s voting reminder features andvoter knowledge platforms (which, among
other things allow local politicians toshare their positions and hold virtual
town halls), for example, support thepillar of building civically engaged
communities. The safe community pillar is
supported by products such as Safety
Check, which allows people to let friends
and loved ones know they are safe intimes of disaster or crisis, and by thecompany’s charitable giving tools, including fundraisers and donations, which help
34 | Total Societal Impact

people come together to support one
another after a crisis.
4. Forging Partnerships to Amplify the
Impact. Nearly all companies havepartnerships with organizations such as
NGOs, development organizations, othercompanies, and governments. But often
there are too many partnerships, and they
don’t focus on large-scale initiatives.
Successful companies build deep relationships with a few “anchor” partners inorder to create large-scale, high-impact
initiatives. The NGOs we spoke with noted
a similar desire for fewer but deeper
partnerships.
Partners often offer complementary
capabilities, such as deep societal impact
knowledge, distribution channels in newmarkets, and strong relationships withlocal governments. Partners such as
development organizations and governments can also be a source of direct
funding. As a result, strong partnerships
can mean the difference between the
success and failure of an initiative. Finally,
partners that engage with the company inlarge-scale initiatives can be a credible
voice when it comes to communicating
the company’s impact.
Merck’s flagship Merck for Mothers
program, focused on ending preventablematernal mortality, involves a number ofpartnerships. One, with Ferring Pharmaceuticals and the World Health Organization (WHO), focuses on postpartum
hemorrhage (PPH), the number one causeof maternal mortality worldwide. A study
called Champion—conducted by the
WHO and supported by Merck andFerring—is comparing the proprietary,room-temperature-stable formulation of
Ferring’s medicine carbetocin withoxytocin for the prevention of PPH
following vaginal birth. While oxytocin islisted as a WHO Essential Medicine forthe prevention of PPH, it requires refrigeration during shipping and storage, andoften suffers from inconsistent quality of
manufacture. If the study, an international, multicenter trial involving as many as

30,000 women, demonstrates the effectiveness of Ferring’s drug, Ferring will seekregistration approval to market the
product in approximately 90 low- andmiddle-income countries. The WHO,
Ferring, and Merck will then work in
partnership to make Ferring’s productaccessible and affordable in those countries. Such an effort could reduce PPH,
particularly in the many areas of theworld where cold storage is difficult toachieve and maintain.
Partnerships can also be used to leverage
the collective buying power of an entire
industry. In 2011, global chemical player
Solvay, along with five other industrial
companies, founded Together for Sustainability (TfS) to standardize sustainability
assessment criteria for suppliers. TfS’s
member base has been steadily growing.
Today, the initiative has 19 full members
in Europe and North America with a
combined $333 billion in revenues. TfS
rates the sustainability of suppliers bytracking metrics in a number of areas,
including the environment and labor
practices. Currently, over 7,600 suppliers
are on the TfS platform. Through thecoalition’s leverage, Solvay is able toinfluence its suppliers—particularly its
1,100 core suppliers—to adopt moresustainable practices. The impact has
been impressive: latest measurements
reveal that 67% of Solvay suppliers thathave been assessed a second time have
improved their sustainability score. For
suppliers that do not score well under TfS,
Solvay works with them to come up with acorrective action plan.
5. Defining Goals and Measuring Results.
Few companies set clear metrics and goals
for the societal benefits they plan tocreate. Even fewer effectively measure
their performance against those goals andthe impact of their TSI-related activities
on financial performance. Our interviews
and work with clients show that setting
goals and measuring progress remain the
biggest gaps for most companies.
Successful companies are defining theright metrics, often aligning them with thegoals of external stakeholders. If a government, for example, sets goals for reducing
infant mortality or bringing women into
the financial system, companies withinitiatives in those areas should measure
their progress using the same metrics thegovernment does. Partners such as NGOs
may have the insight and expertise toassess the real-world impact of specificcompany activities. Companies also needto design internal cause-and-effect models
to tie societal impact activities to businessperformance.

Setting goals and measuring
progress remain the biggest
gaps for most companies.
Some companies are beginning to solve
the measurement problem. Standard Bank
has developed what it calls the SEE framework, which helps each business line takeaccount of its social, economic, andenvironmental (SEE) impacts. In one case,the agribusiness unit found that by
restructuring debt for 38 of Standard
Bank’s South African agribusiness clients’loans during a drought, the bank indirectly saved over 700 jobs, kept 120,000 acresof land agriculturally productive, andmaintained more than $14 million ineconomic activity within the local economy from those clients. The bank has
adopted the SEE framework as one of fivevalue drivers (others include employee
engagement and client focus), which
guide decision making and reporting. The
goal of this initiative is to make the bank’s
purpose—supporting Africa’s growth—tangible to its employees, clients, andstakeholders.
6. Engaging with Key Stakeholders on theIssues That Matter to Them. The company should also engage directly with key
stakeholders—including employees,
customers, and governments—in order tounderstand and work with them on thesocietal issues that matter to them. If
companies focus on issues that are not
The Boston Consulting Group | 35

relevant to these stakeholders, theirefforts are likely to yield little benefit to
the company.
As part of its exploration and production
activities, BP not only engages with
communities but also works with national
governments to agree on local content
requirements for materials and services,align on local workforce targets, andcollaborate on economic development. In
the Bintuni Bay area of Indonesia’s Papua
Barat province, where the company
operates its Tangguh liquefied natural gas(LNG) project, BP has various initiatives,
including efforts aimed at reducing
malaria and increasing local villages’
access to energy. The company also hosts
and participates in the TIAP (Tangguh
International Advisory Panel), a large
group that engages with national and local
government agencies, international NGOs,
and community leaders to review important social and environmental issues
related to the Tangguh project. In addition,
every six months BP provides reports on
those issues to the Indonesian government.

The board must be involved
in integrating TSI activities
into the business.
BP’s collaborative approach to government partnership helps earn the company
a seat at the table with government
leaders around the world. When thegovernment of Azerbaijan created astrategic roadmap for economic reform in
2016, for example, it asked BP for input
on the energy sector component of theplan.
PNC, for its part, engages with both
employees and customers through thecreation of Regional Diversity andInclusion Councils in each market, which
are led by the regional president andretail market manager. The councils are
made up of representatives from all linesof business, from retail banking to wealth36 | Total Societal Impact

management. Their objective is to generate revenue by attracting new customers,
partnering with diverse suppliers, hiring
diverse employees who reflect theirrespective markets, and strengthening thebank’s relationships with communities.
7. Making TSI Integral to Investor Engagement. Information on the effect of TSI
activities externally as well as on financial
performance needs to be integrated into
all communications with investors.
Companies should include this information in both their annual reports and all
regular communications and events withinvestors throughout the year. Forwardlooking CEOs believe that such integrated
communications may increase the proportion of long-term investors.
Some companies are taking creative
approaches to investor communications.
BP, for example, splits its investor relations function in two. While the bulk of IR
reports to the CFO and engages withinvestors on financial and strategic issues,a smaller IR team that is part of thestrategy group engages with socially
responsible investors and with mainline
investors on societal impact topics. This
structure reflects the company’s view thatkey societal impact topics are directly tied
to BP’s strategy.
8. Establishing the Right Governance andIncentives. The involvement of the boardof directors is critical to integrating
societal impact activities into the business.
Unfortunately, evidence indicates that
directors are not taking the lead in thisregard. According to the 2017 MIT/BCG
study Corporate Sustainability at a Crossroads, 86% of company respondents said
that boards should play a strong role in acompany’s sustainability efforts, but only
30% believed that their company hadstrong board-level oversight in this area.
A major reason for this is that mostdirectors believe their fiduciary duty is toshareholders. In fact, the duty of theboard is to the corporation itself. The
board can and should decide on the timeframes for creating shareholder value andsupport a strong TSI focus in the company’s strategy. The board and long-term
shareholders can provide a strong line ofdefense to the CEO when activist investors
come along who are only looking for
short-term gains and may care less about
the long-term viability of the company.
In addition to a supportive and engaged
board, companies need an appropriate
structure for managing TSI activities.
Typically, this has been the responsibilityof a dedicated team, often called Corporate Social Responsibility or Corporate
Sustainability. The activities of suchteams, however, have not necessarily been
integrated into the business. A better
approach is for business units to takeresponsibility for their own TSI-related
activities. The CSR function can bereinvented as a center of excellence
focused on delivering TSI and TSR intandem. This newly empowered function
can provide support and input to thebusiness units and other teams, including
investor relations. It should also be
directly connected to the corporate
strategy-setting process.
Finally, companies should create incentives for pursuing TSI efforts. For instance,
a portion of senior managers’ compensation should be tied to relevant social andenvironmental metrics. If those leaders

are held to account for meeting TSI
objectives, that focus will permeate theorganization. In addition, formal programs
should be established to recognize
individuals who make major contributions
to TSI.
Solvay has made a concerted effort toensure that its organization and governance support its social and environmental efforts. The company’s CEO tapped thehead of energy services to serve as chiefsustainability officer in order to ensurethat the person in that role would understand the perspectives of business leaders.
The deep connection to the business helps
the CSO challenge executives to integratesocial and environmental issues into
day-to-day operations. Notably, he helped
embed 40 sustainability champions in the
global business units and functions.
Solvay is also holding senior management
accountable for progress. The company
tracks a series of metrics in five areas—
safety, business solutions, carbon intensity,
employee engagement, and societal
actions—and links senior managementcompensation to the company’s performance in those areas. In 2017, for example, adjustments were made so that 20%of the long-term compensation of Solvay’s
CEO will be tied to a metric on greenhouse gas emissions.

The Boston Consulting Group | 37

A CALL TO ACTIONT

he effort to make meaningful contributions to society must start at the top.
All CEOs should ask themselves the following
questions: Do I believe we are telling our
stakeholders the full story about the societal
value we are adding? Is the company fully
integrating a TSI perspective into strategy
setting and the tuning of the business model?
Do we make TSI explicit in strategy goals,
operating plans, and targets?

profits, thoughtful adjustments that factor insocietal impact will likely pay off over thelong term.

If the answer to those questions is no, thecompany is likely not realizing its full potential in TSI and is missing out on significant
opportunities.

Third, the CEO needs to assess the company’s
current TSI. This requires a comprehensive
review of the economic and societal benefitsof everything the company does, from the fullvalue of its products and services to the way
it sources raw materials to the way it sells
and distributes to the role it plays in its
industry.

TSI cannot be the sole
responsibility of one teamin the organization.
There are four things the CEO can do to help
the company improve its TSI and TSR. First,
the CEO should envision what the company’ssocietal impact should be. In particular, CEOs
need to look into the future to gain insight on
how their core product or service should
evolve to be in step with changing societal
expectations and demands and evolving
regulations. Even if shifts to the product orservice portfolio may not offer near-term
38 | Total Societal Impact

Second, CEOs should communicate that aspiration and concrete goals to shareholders andother stakeholders. Done well, this can renew
and strengthen the sense of purpose in theorganization, the meaning of the brand, andthe legacy of the CEO.

Fourth, the CEO must turn vision into action
by integrating TSI concepts into strategy setting and the business model. Our researchshows that absent demonstrated commitment
from the top, it is difficult for the TSI mindset
to become embedded in corporate thinking
and operations.
TSI cannot be the sole responsibility of
one team in the organization. Rather,
it must be elevated alongside the goal of
creating value for shareholders and become
an essential part of the senior team’s agenda.

APPENDIXBACKGROUND AND OUTPUTS OF QUANTITATIVE ANALYSIS

Our quantitative study is based on an analysis of 343 global companies for the three-year
period from 2013 through 2015. The sample
includes 97 companies in consumer packaged
goods, 39 in biopharmaceuticals, 66 in oil andgas, and 141 in retail and business banking.
For all companies in the sample, we gatheredfinancial data from S&P Capital IQ and environmental, social, and governance (ESG) datafrom MSCI and Oekom Research, two ESG
data vendors. Data was collected for 2013
through 2015 because of the availability offinancial data and the completeness of ESG
reporting for the companies in our sample.
Our analyses are on the company-year level,
meaning that we have up to three observations per company.
In creating our industry-specific topic scores,
we took the following steps: First, we mapped
the ESG metrics provided by MSCI and Oekom against the ESG topics we had developed and selected the most appropriate metrics for each topic. (See Table 1 for important
ESG topics by industry.) Second, we normalized all ESG measures across all four industries from the two data vendors to adjust fordifferences in reporting scales by using az-score method.1 If there were fewer than 30
companies reported for an individual measure, we removed the measure from the analysis. Finally, we averaged similar normalized
individual measures to create the topic scores.

(See Table 2 for a complete list of topics andmetrics, where applicable, by industry.)

Valuation Analysis
We categorized each topic as either downside
topic or upside opportunity. We leveraged
BCG’s proprietary Smart Multiple
methodology to analyze the impact of each
topic as well as the combined downside andcombined upside measures on a company’svaluation multiple.2 Smart Multiple is amultivariate model that uses fundamental
inputs to generate a valuation for thebusiness at a certain point in time. Using thisapproach, we have found it possible toidentify what differentiates multiples in anindustry and, in this way, to explain why
different companies have different multiples.
We added each ESG topic to the existing (financial) drivers of valuation multiples within
the multivariate regression model. As a multivariate regression model, Smart Multiple allows us to independently identify and quantify the relationship between valuation
multiples and ESG scores. Unless otherwise
noted, all results of our two-tailed t-tests are
significant at the 95% level (p < 0.05 and|t| > 1.96).
We found that several individual topics (aswell as the aggregated downside topics) havea positive, statistically significant relationship
The Boston Consulting Group | 39with valuation multiples. (See Table 3 for detailed outputs for all topics with statisticallysignificant outcomes.)

Margin Analysis
Our analysis of the association between industry margins and ESG topic scores is also amultivariate model, which allows us to identify the relationship between our individual
ESG topic scores and a company’s fundamentals. As in our valuation analyses, the multivariate regressions allow us to independently
identify and quantify the relationship between a company’s margin and its key drivers. As controls in the multivariate analysis,
we include the effects of several other financially related margin inputs, such as R&D
costs. Unless otherwise noted, all results ofour two-tailed t-tests are significant at the
95% level (p < 0.05 and |t| > 1.96).
We found several individual topics that havea positive, statistically significant relationshipwith EBITDA margins and/or gross margins
in consumer packaged goods, biopharmaceuticals, and oil and gas, and with net income
margin in retail and business banking. (SeeTable 4 for detailed outputs for all topics withstatistically significant outcomes.)

Notes
1. Z-score = (x – population mean)/ standard deviation;
population are companies in the same industry andmeasure.
2. For more information the Smart Multiple model see,see Unlocking New Sources of Value Creation: The 2013
Value Creators Report, BCG, September 2013.

Table 1
Important ESG Topics in All Five Industries
ENVIRONMENTAL

SOCIAL

GOVERNANCE

INPUTS
Sourcing andprocurement• Environmentally
responsible sourcing• Socially responsible sourcing

Manufacturing
and businesspractices• Ensuring a responsible
environmental footprint– Pursuing efficientenergy consumption
and resource use;
minimizing harmful
emissions• Implementing fair and responsible
compensation practices– Pursuing living wages for employees;
encouraging long-term thinking incompensation structures• Promoting employee safety– Ensuring robust health and safety
management systems• Promoting workplace flexibility– Providing adequate benefits (e.g., healthcare, leave); prioritizing employee
happiness and satisfaction• Protecting and promoting equal
opportunity– Ensuring nondiscrimination in hiring andadvancement; encouraging and valuing
diversity• Supporting local community development– Donating to local nonprofits and providing
benefits to the community• Supporting ongoing employee training– Investing in training, education, anddevelopment for current employees andthe workforce of the future

OUTPUTS
Products
and services;
distribution

40 | Total Societal Impact• Providing support in humanitarian crises• Avoiding and combating
corruption– Maintaining strict ethicalstandards; working
against multiple forms ofcorruption• Avoiding anticompetitive
behavior– Ensuring that nobusiness practices unduly
prevent, reduce, ormanipulate competition
in a marketplace• Maximizing impact ofcorporate giving programs– Leveraging core businessand employee skills tomaximize the benefit of
traditional corporate
philanthropy programs• Promoting transparent
lobbying– Reporting oncontributions to lobbyists
and all lobbying efforts

Important ESG Topics in Consumer Packaged Goods
ENVIRONMENTAL

SOCIAL

GOVERNANCE

INPUTS
Sourcing andprocurement• Conserving water

Manufacturing
and businesspractices• Limiting negative effects on
biodiversity and ecology– Managing impacts on
wildlife, air, land, andgroundwater• Reducing waste– Minimizing levels of waste,
including food waste• Investing in health and safety best practices for
migrant workers– Maintaining best practices in light of commonly
disenfranchised and unorganized migrant
workers• Preventing mistreatment of animals– Treating animals well and planning for increased
animal welfare regulation• Lobbying for industry-widestandards and norms– Creating better standards;
lobbying for those standards• Minimizing impact of
products and packaging– Reducing solid waste sent
to landfills through better
design of products andpackaging– Investing in capacity torecycle postsale• Ensuring that products reach bottom of pyramid– Investing in products appropriate for BOP and
ensuring that they reach underserved areas• Fair marketing and accurate labeling– Demonstrating the benefits of consumption inan ethical manner and labeling accurately• Implementing a food safety management program– Avoiding spoilage and contamination; investingin supply chain traceability• Improving nutritional and health attributes of
product portfolio– Taking into account key nutritional and healthconcerns in the creation of products• Implementing an efficient andeffective recall process– Monitoring for adverse
events; recalling products
when necessary

OUTPUTS
Products
and services;
distribution

Important ESG Topics in Biopharmaceuticals
ENVIRONMENTAL

SOCIAL

GOVERNANCE• Conducting ethical human clinical trials– Developing robust protocols; ensuring thatpatients are not exposed to unnecessary risks;
protecting vulnerable populations• Preventing mistreatment of animals– Ensuring ethical and humane treatment ofanimals in research and testing• Investing and participating inprecompetitive scientificresearch– Developing, aggregating, andsharing data essential toinnovation but that provides
little competitive advantage• Expanding access to drugs– Providing necessary drugs to markets in needwith fair, affordable pricing structures• Investing in disease and treatment education– Educating the public (especially underserved
populations) beyond traditional marketing• Practicing ethical marketing– Promoting products responsibly and reporting
risks and benefits accurately• 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• Committing to
responsible/value-based pricing– Pricing on the basis of valueeven in the absence ofcompetition• Maintaining product quality
and safety– Implementing robust
processes to minimize recalls
and audit raw materials

INPUTS
Sourcing andprocurement
Manufacturing
and businesspractices

OUTPUTS
Products
and services;
distribution• Minimizing impact of
products and packaging– Reducing improperly
disposed waste or waste
sent to landfills postsale
through turn-in andrecycling programs

The Boston Consulting Group | 41

Important ESG Topics in Oil and Gas
ENVIRONMENTAL

SOCIAL

Sourcing andprocurement• Minimizing carbon intensity
in reserves– Understanding the risk of
future reserve devaluation• Investing in science education to build talent andlabor pipeline– Engaging and educating the public on importanceof STEM and energy use

Manufacturing
and businesspractices• Reducing impact on
biodiversity, water, andecology– Minimizing effects ofextraction, refinement,
storage, and transport• Reducing waste– Minimizing waste asprospecting becomesincreasingly hard

• Investing in community relations• Investing in direct economic and capacity support(e.g., infrastructure)– Improving local infrastructure and services withpublic-private partnerships, especially in thedeveloping world• Maintaining process-oriented health and safety
programs– Ensuring efficient and effective personal andprocess safety• Providing direct support to communities withparticularly vulnerable populations– Especially indigenous people, conflict zones,
areas with weak governments• Respecting human rights• Supporting economic development– Advising national and regional governments onnational social/economic development• Supporting emergency preparedness and response

GOVERNANCE

INPUTSOUTPUTS
Products
and services;
distribution• Investing in alternative
energy– Advanced biofuels, solar• Investing in energy efficiency
education for end users• Developing robust disastermanagement and responseplans– Championing a safety culture

Important ESG Topics in Retail and Business Banking
ENVIRONMENTAL

SOCIAL

GOVERNANCE

INPUTS
Sourcing andprocurement• Developing training and outreach programs to
support students and build talent pipeline– Developing internships for highperforming youth from disadvantaged
backgrounds or underrepresented groups

Manufacturing
and businesspractices• Ensuring responsible stewardship of data
– Appropriately capturing and using data; transparently informing customers about data policies• Securing business and personal data
– Safeguarding against unauthorized access• Shaping regulatory environment and policy– Especially through public-private partnerships

OUTPUTS
Products
and services;
distribution• Supporting organizations
promoting climate action– Lending to organizations(e.g., SMEs and NGOs)
devoted to environmental
protection and clean
energy42 | Total Societal Impact• Ensuring fair debt collection– Avoiding deceptive collection practices• Ensuring fair selling practices– Providing transparent, culturally sensitive, andsound advice• Investing in organizations promoting social
development– Lending to organizations (e.g., SMEs and NGOs)
with clear social missions• Promoting financial education– Providing consumers with money management
education (e.g., retirement planning)• Promoting financial inclusion– Increasing access and affordability for individuals
in underserved markets• Promoting SMEs

• Integrating environmental
factors into credit risk analysis– Considering industry-specificenvironmental factors in
lending, investment, and due
diligence• Maximizing benefit ofgovernment-mandated financial
community contributions– Selecting high-social-impact
programs; implementing themeffectively; measuring theirimpactImportant ESG Topics in Technology
ENVIRONMENTAL

SOCIAL

GOVERNANCE

INPUTS
Sourcing andprocurement• Developing training and outreach programs to
support students and build talent pipeline– Developing internships for high-performing youth
from disadvantaged backgrounds orunderrepresented groups

Manufacturing
and businesspractices• Securing business and personal data
– Safeguarding and protecting data against
unauthorized access and intrusion

OUTPUTS
Products
and services;
distribution• Developing technology
products and services that
help protect theenvironment– Developing and expanding
access to products andservices that protect theenvironment• Creating inclusive products– Designing products specifically for use by
marginalized groups• Leveraging data for social good
• Making existing products inclusive– Developing adaptations to existing products for
marginalized groups• Advocating open access totechnology and the internet

Sources: SASB; GRI; MSCI; Oekom Research; expert interviews; BCG analysis.

Table 2
Consumer Packaged GoodsTOPIC

METRICVENDOR

Measures to ensure water conservation in agricultural production along
the value chain

Oekom Research

Policy on responsible marketing

Oekom Research

Implementation of a food safety management system

Oekom Research

Improving nutritional andhealth attributes of productportfolio

Nutrition targets relating to product portfolio

Oekom Research

Limiting negative effects on
biodiversity and ecology

Measures to promote sustainable soil and biodiversity management inagricultural production along the value chain

Oekom Research

Minimizing impact of
products and packaging

Development of the packaging ratio

Oekom Research

Measures to reduce the impact of packaging

Oekom Research

Avoiding and combating corruption

MSCI

Business Ethics

MSCI

Code of business ethics

Oekom ResearchCompliance procedures

Oekom Research

Major controversies relating to business ethics

Oekom Research

Certification of the environmental management system to aninternational standard

Oekom Research

Energy efficiency

MSCI

Ensuring responsible environmental footprint

MSCI

Minimizing carbon intensity in reserves

MSCI

Position on climate change

Oekom ResearchConserving water
Fair marketing and accurate
labeling
Implementing a food safety
management program

Avoiding and combating
corruption

Ensuring a responsible
environmental footprint

Position on health and nutrition aspects of products

Green: Industry-specific topics
Blue: Cross-industry topics

The Boston Consulting Group | 43

Consumer Packaged Goods (continued)
METRICTOPIC

Environmentally responsible
sourcing

Implementing fair andresponsible compensation
practices

Promoting employee safety

Promoting transparent
lobbying

Promoting workplace
flexibility

Protecting and promoting
equal opportunity

Socially responsible sourcing

Supporting ongoing employee
training
Ensuring that products reachbottom of pyramid
Implementing an efficient andeffective recall process
Investing in health and safety
best practices for migrant
workers
Lobbying for industry-widestandards and norms
Preventing mistreatment ofanimals
Reducing waste
Avoiding anticompetitive
behavior
Maximizing impact ofcorporate giving programs
Providing support inhumanitarian crises
Supporting local community
development

44 | Total Societal Impact

VENDOR

Environmental standard for the sourcing of renewable raw materials
and/or bio-based products

Oekom Research

Environmental supplier standard

Oekom Research

Procedures to ensure compliance with the environmental standard forthe sourcing of renewable raw materials and/or bio-based products

Oekom Research

Procedures to ensure compliance with the environmental supplierstandard

Oekom Research

Position on non-regular employment

Oekom Research

Public disclosure of CEO-to-employee compensation ratio

Oekom Research

Certification of the health and safety management system to aninternational standard

Oekom Research

Health and safety management system

Oekom Research

Implementation of a health and safety management system

Oekom Research

Political contributions

Oekom Research

Transparency on participation in public-policy making and lobbying
activities

Oekom Research

Dependant care and special leave

Oekom Research

Workplace flexibility and working time reduction

Oekom Research

Gender distribution

Oekom Research

Measures to promote equal opportunities and diversity

Oekom Research

Policy on non-discrimination

Oekom Research

Measures to enable key suppliers to safeguard labor rights and improve
working conditions
Procedures to ensure compliance with the supplier standard on laborrights and working conditions

Oekom ResearchOekom Research

Supplier standard with regard to labor rights and working conditions

Oekom Research

Strategic training management

Oekom Research

Supporting ongoing employee training

MSCI

Not available
Not available
Not available
Not available
Not available
Not available
Not available
Not available
Not available
Not available

Biopharmaceuticals
TOPIC
Conducting ethical humanclinical trials

Expanding access to drugs

Maintaining product quality
and safety

Practicing ethical marketing
Preventing mistreatment ofanimals
Supporting orphan andneglected diseases

Avoiding and combating
corruption

Ensuring a responsible
environmental footprint

Environmentally responsible
sourcing

Implementing fair andresponsible compensation
practices
Promoting employee safety

Promoting transparent
lobbying
Promoting workplace
flexibility
Protecting and promoting
equal opportunity

Socially responsible sourcing

METRICVENDOR

Protection of vulnerable trial participants
Strategy to ensure the ethical design of clinical trials
Expanding access to drugs
Patents and licensing
Pricing and availability
Strategy and management approach regarding access to medicine
Maintaining product quality and safety
Good manufacturing practice
Monitoring of products after market launch
Anticounterfeiting
Disclosure of performance data on marketing compliance
Major controversies relating to responsible marketing
Policies on responsible marketing and interactions with patients and the
publicOekom ResearchOekom Research
MSCI
Oekom ResearchOekom ResearchOekom Research
MSCI

Replacement, reduction and refinement of animal testing

Oekom Research

R&D into neglected diseases affecting mainly developing countries

Oekom Research

Avoiding and combating corruption
Business Ethics
Code of business ethics
Compliance procedures
Major controversies relating to business ethics
Certification of the environmental management system to aninternational standard
Energy efficiency
Ensuring responsible environmental footprint
Minimizing carbon intensity in reserves
Position on climate change
Environmental standard for the sourcing of renewable raw materials
and/or bio-based products
Environmental supplier standard
Procedures to ensure compliance with the environmental standard forthe sourcing of renewable raw materials and/or bio-based products
Procedures to ensure compliance with the environmental supplierstandard
Position on non-regular employment

MSCI
MSCI
Oekom ResearchOekom ResearchOekom Research

Public disclosure of CEO-to-employee compensation ratio

Oekom Research

Certification of the health and safety management system to an international standard
Health and safety management system
Implementation of a health and safety management system
Political contributions
Transparency on participation in public policy making and lobbying
activities
Dependant care and special leave
Workplace flexibility and working time reduction
Gender distribution
Measures to promote equal opportunities and diversity
Policy on non-discrimination
Measures to enable key suppliers to safeguard labor rights and improve
working conditions
Procedures to ensure compliance with the supplier standard on laborrights and working conditions
Supplier standard with regard to labor rights and working conditions

Oekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom Research
MSCI
MSCI
MSCI
Oekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom Research

The Boston Consulting Group | 45

Biopharmaceuticals (continued)
TOPIC
Supporting ongoing employee
training
Committing to responsible/
value-based pricing
Investing and participating
in precompetitive scientificresearch
Investing in disease andtreatment education
Minimizing impact of
products and packaging
Reducing spread ofcounterfeit drugs
Avoiding anticompetitive
behavior
Maximizing impact ofcorporate giving programs
Providing support inhumanitarian crises
Supporting local community
development

METRIC
Strategic training management
Supporting ongoing employee training

VENDOR
Oekom Research
MSCI

Not available
Not available
Not available
Not available
Not available
Not available
Not available
Not available
Not available

Oil and Gas
TOPIC
Developing robust disastermanagement and responseplans
Investing in alternative energy

Maintaining process-oriented
health and safety programs
Minimizing carbon intensity
in reserves
Investing in community
relations
Reducing impact on
biodiversity, water, andecology

Reducing waste

Respecting human rights

Avoiding and combating
corruption

46 | Total Societal Impact

METRICVENDOR

Measures to enhance emergency response and preparedness

Oekom Research

Alternative Energy

MSCI

Promotion of alternative fuels

Oekom Research

Accident rate

Oekom Research

Maintaining robust occupational health and safety programs, with afocus on process safety

MSCI

Occurrence of fatal accidents

Oekom Research

Carbon intensity of fossil fuel reserves (MtCO2/mmboe)

MSCI

Transparency on accessibility and types of reserves

Oekom ResearchCommunity involvement

Oekom Research

Biodiversity management

Oekom Research

Limiting negative impacts to biodiversity and ecology

MSCI

Reducing impact on biodiversity, water, and ecology

MSCI

Disposal of hazardous wastes from oil and gas exploration andproduction

Oekom Research

Environmentally safe operation of facilities

Oekom Research

Hazardous waste intensity

Oekom Research

Reduction of gas flaring and venting

Oekom Research

Human rights due diligence procedures

Oekom Research

Major controversies relating to human rights

Oekom Research

Policy on human rights

Oekom Research

Avoiding and combating corruption

MSCI

Business Ethics

MSCI

Code of business ethics

Oekom ResearchCompliance procedures
Major controversies relating to business ethics

Oekom ResearchOekom ResearchOil and Gas (continued)
TOPIC

Ensuring a responsible
environmental footprint

Environmentally responsible
sourcing

Implementing fair andresponsible compensation
practices
Promoting employee safety

Promoting transparent
lobbying
Promoting workplace
flexibility
Protecting and promoting
equal opportunity

Socially responsible sourcing

Supporting ongoing employee
training
Investing in direct economic
and capacity support (e.g.,
infrastructure)
Investing in energy efficiency
education for end users
Investing in science education
to build talent and labor
pipeline
Providing direct support tocommunities with particularly
vulnerable populations
Supporting economic
development
Supporting emergency
preparedness and response
Avoiding anticompetitive
behavior
Maximizing impact ofcorporate giving programs
Providing support inhumanitarian crises
Supporting local community
development

METRICVENDOR

Certification of the environmental management system to aninternational standard
Energy efficiency
Ensuring responsible environmental footprint
Minimizing carbon intensity in reserves
Position on climate change
Environmental standard for the sourcing of renewable raw materials
and/or bio-based products
Environmental supplier standard
Procedures to ensure compliance with the environmental standard forthe sourcing of renewable raw materials and/or bio-based products
Procedures to ensure compliance with the environmental supplierstandard
Position on non-regular employment
Public disclosure of CEO-to-employee compensation ratio

Oekom Research
MSCI
MSCI
MSCI
Oekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom Research

Certification of the health and safety management system to aninternational standard
Health and safety management system
Implementation of a health and safety management system
Political contributions
Transparency on participation in public policy making and lobbying
activities
Dependant care and special leave
Workplace flexibility and working time reduction
Gender distribution

Oekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom ResearchOekom Research

Measures to promote equal opportunities and diversity

Oekom Research

Policy on non-discrimination

Oekom Research

Measures to enable key suppliers to safeguard labor rights and improve
working conditions

Oekom Research

Procedures to ensure compliance with the supplier standard on laborrights and working conditions

Oekom Research

Supplier standard with regard to labor rights and working conditions

Oekom Research

Strategic training management

Oekom Research

Supporting ongoing employee training

MSCI

Not available
Not available
Not available
Not available
Not available
Not available
Not available
Not available
Not available
Not available

The Boston Consulting Group | 47

Retail and Business Banking
TOPIC

METRICVENDOR

Ensuring fair debt collection

Responsible treatment of clients with debt repayment problems

Oekom Research

Ensuring fair selling practices

Measures to ensure responsible sales practices

Oekom Research

Environmental aspects in the retail credit rating process

Integrating environmental
factors into credit risk analysis Integrating environmental factors into credit risk analysis

Oekom ResearchSocially responsible investment products and services
Investing in organizations
promoting social development Volume of strict and diligently-selected socially responsible investments

Oekom Research

Promoting financial inclusion

Securing business andpersonal data

Avoiding and combating
corruption

Ensuring a responsible
environmental footprint

Environmentally responsible
sourcing

Implementing fair andresponsible compensation
practices
Promoting employee safety

Promoting transparent
lobbying
Promoting workplace
flexibility
Protecting and promoting
equal opportunity

Socially responsible sourcing

Oekom Research

Equal access to financial services

Oekom ResearchSocial financial services

Oekom Research

Certification of the information security management system to aninternational standard

Oekom Research

Implementation of an information security management system

Oekom Research

Measures to ensure customer security

Oekom Research

Securing business and personal data

MSCI

Avoiding and combating corruption

MSCI

Business Ethics

MSCI

Code of business ethics

Oekom ResearchCompliance procedures

Oekom Research

Major controversies relating to business ethics

Oekom Research

Certification of the environmental management system to aninternational standard

Oekom Research

Energy efficiency

MSCI

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
and/or bio-based products

Oekom Research

Environmental supplier standard

Oekom Research

Procedures to ensure compliance with the environmental standard forthe sourcing of renewable raw materials and/or bio-based products
Procedures to ensure compliance with the environmental supplierstandard

Oekom ResearchOekom Research

Position on non-regular employment

Oekom Research

Public disclosure of CEO-to-employee compensation ratio

Oekom Research

Certification of the health and safety management system to aninternational standard

Oekom Research

Health and safety management system

Oekom Research

Implementation of a health and safety management system

Oekom Research

Political contributions

Oekom Research

Transparency on participation in public-policy making and lobbying
activities

Oekom Research

Dependant care and special leave

Oekom Research

Workplace flexibility and working time reduction

Oekom Research

Gender distribution

Oekom Research

Measures to promote equal opportunities and diversity

Oekom Research

Policy on non-discrimination

Oekom Research

Measures to enable key suppliers to safeguard labor rights and improve
working conditions
Procedures to ensure compliance with the supplier standard on laborrights and working conditions
Supplier standard with regard to labor rights and working conditions

48 | Total Societal Impact

MSCI

Oekom ResearchOekom ResearchOekom Research

Retail and Business Banking (continued)
TOPIC

METRICVENDOR

Supporting ongoing employee Strategic training management
training
Supporting ongoing employee training
Developing training andoutreach programs to support
students and build talentpipeline
Ensuring responsible
stewardship of data
Maximizing benefit ofgovernment-mandated
financial community
contributions

Oekom Research
MSCI

Not available
Not available
Not available

Promoting financial education Not available
Promoting SMEs

Not available

Shaping regulatoryenvironment and policy

Not available

Supporting organizations
promoting climate action

Not available

Avoiding anticompetitive
behavior

Not available

Maximizing impact ofcorporate giving programs

Not available

Providing support inhumanitarian crises

Not available

Supporting local community
development

Not available

Technology
TOPIC

Securing business andpersonal data

Avoiding and combating
corruption

Ensuring a responsible
environmental footprint

METRICVENDOR

Certification of the information security management system to aninternational standard
Implementation of an information security management system

Oekom ResearchOekom Research

Measures to ensure customer security

Oekom Research

Securing business and personal data

MSCI

Avoiding and combating corruption

MSCI

Business Ethics

MSCI

Code of business ethics

Oekom ResearchCompliance procedures

Oekom Research

Major controversies relating to business ethics

Oekom Research

Certification of the environmental management system to aninternational standard

Oekom Research

Energy efficiency

MSCI

Ensuring responsible environmental footprint

MSCI

Minimizing carbon intensity in reserves

MSCI

Position on climate change

Oekom Research

The Boston Consulting Group | 49

Technology (continued)
METRICTOPIC

Environmentally responsible
sourcing

Implementing fair andresponsible compensation
practices

Promoting employee safety

Promoting transparent
lobbying

Promoting workplace
flexibility

Protecting and promoting
equal opportunity

Socially responsible sourcing

Supporting ongoing employee
training

Environmental standard for the sourcing of renewable raw materials
and/or bio-based products

Oekom Research

Environmental supplier standard

Oekom Research

Procedures to ensure compliance with the environmental standard forthe sourcing of renewable raw materials and/or bio-based products

Oekom Research

Procedures to ensure compliance with the environmental supplierstandard

Oekom Research

Position on non-regular employment

Oekom Research

Public disclosure of CEO-to-employee compensation ratio

Oekom Research

Certification of the health and safety management system to aninternational standard

Oekom Research

Health and safety management system

Oekom Research

Implementation of a health and safety management system

Oekom Research

Political contributions

Oekom Research

Transparency on participation in public-policy making and lobbying
activities

Oekom Research

Dependant care and special leave

Oekom Research

Workplace flexibility and working time reduction

Oekom Research

Gender distribution

Oekom Research

Measures to promote equal opportunities and diversity

Oekom Research

Policy on non-discrimination

Oekom Research

Measures to enable key suppliers to safeguard labor rights and improve
working conditions

Oekom Research

Procedures to ensure compliance with the supplier standard on laborrights and working conditions

Oekom Research

Supplier standard with regard to labor rights and working conditions

Oekom Research

Strategic training management

Oekom Research

Supporting ongoing employee training

MSCI

Advocating open access totechnology and the internet

Not available

Creating inclusive products

Not available

Developing technology
products and services that
help protect the environment

Not available

50 | Total Societal Impact

VENDOR

Technology (continued)
METRICTOPIC
Developing training andoutreach programs to support
students and build talentpipeline

Not available

Leveraging data for social
good

Not available

Making existing products
inclusive

Not available

Avoiding anticompetitive
behavior

Not available

Maximizing impact ofcorporate giving programs

Not available

Providing support inhumanitarian crises

Not available

Supporting local community
development

Not available

VENDOR

Table 3
Valuation Analysis

DIFF. BETWEENTOP QUINTILE
AND MEDIAN (%)

T-STAT (STAT.
SIG. IF |T|>1.96)

Conserving water

5

3.08

Ensuring a responsible environmental footprint

4

3.08

Implementing a food safety management program

7

2.28

Avoiding and combating corruption

4

2.14

Conducting ethical human clinical trials

16

2.09

Preventing mistreatment of animals

31

4.52

Promoting employee safety

16

2.68

Promoting transparent lobbying

18

3.14

Protecting and promoting equal opportunity

28

3.43

Socially responsible sourcing

20

2.01

Avoiding and combating corruption

12

3.21

Maintaining process-oriented health and safety programs

21

6.21

Reducing impact on biodiversity, water, and ecology

18

2.94

Ensuring a responsible environmental footprint

11

1.93

Integrating environmental factors into credit risk analysis

4

1.72

Securing business and personal data

8

1.73

TOPIC

INDUSTRY

Consumer packaged
goods

Biopharmaceuticals

Oil and gas

Retail and businessbanking**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.

The Boston Consulting Group | 51

Table 4
Margin Analysis

AVERAGE MARGIN
PREMIUM OF TOP VS.
MEDIAN PERFORMERS (PP)

T-STAT(STAT.
SIG. IF
|T|>1.96)

EBITDA margin

3.1

4.03

Gross margin

5.5

3.36

EBITDA margin

1.3

4.88

Gross margin

3.3

5.82

EBITDA margin

3.0

2.54

EBITDA margin

4.1

5.34

Gross margin

12.4

8.52

Promoting employee safety

Gross margin

3.3

2.61

Socially responsible sourcing

Gross margin

4.8

3.11

EBITDA margin

6.1

3.45

Gross margin

6.3

3.11

EBITDA margin

8.2

4.08

Gross margin

6.7

2.72

EBITDA margin

4.6

2.28

Gross margin

4.8

2.07

EBITDA margin

5.6

3.49

Maintaining process-oriented health and
EBITDA marginsafety programs

3.4

2.23

EBITDA margin

8.2

5.30

Gross margin

6.3

2.78

Avoiding and combating corruption

Net income margin

2.3

5.36

Ensuring fair debt collection

Net income margin

0.5

3.53

Ensuring fair selling practices

Net income margin

0.4

3.61

Environmentally responsible sourcing

Net income margin

3.4

2.67

Integrating environmental factors into
credit risk analysis

Net income margin

–3.3

–3.6

Promoting financial inclusion

Net income margin

0.5

3.61

Protecting and promoting equal
opportunity

Net income margin

–3.1

–2.12

TOPIC

INDUSTRYFUNDAMENTAL

Conserving water

Ensuring a responsible environmental
footprint
Consumer packaged Limiting negative effects on biodiversity
goods
and ecology
Minimizing impact of products andpackaging

Conducting ethical human clinical trials

Expanding access to drugs
Biopharmaceuticals

Promoting employee safety

Promoting transparent lobbying

Oil and gas
Supporting ongoing employee training

Retail and businessbanking

52 | Total Societal Impact

NOTE TO THE READER
About the Authors

Douglas Beal is a director in BCG’s
Social Impact practice. Robert
Eccles is a senior advisor to the
BCG Henderson Institute and aprofessor at the SaÏd Business
School, University of Oxford. Gerry
Hansell is a senior partner andmanaging director in BCG’s
Corporate Development practice.
Rich Lesser is the president andCEO of BCG. Shalini Unnikrishnan
is a partner and managing director
in BCG’s Social Impact practice.
Wendy Woods is a senior partnerand managing director and thehead of BCG’s global Social Impact
practice. David Young is a senior
partner and managing director in
BCG’s Social Impact practice.

Acknowledgments

This report was produced byexperts in BCG’s Social Impact,
Strategy, and Corporate
Development practices, and it
represents the continuing
collaborative efforts of BCG staff
from our offices around the world.
The authors would particularly liketo thank and acknowledge thecontributions of Olga Berlinsky,
Ryan Jones, and Anant Thaker, whomanaged the project, as well as
Martin Reeves, Johan Öberg, andHolger Rubel, who served on thesteering committee.
They would also like to thank the
BCG team that conducted theresearch and analysis for this study,
including Jacqueline DePasse, Jodie
Fernandes, Shawn Flaherty, Ben
Galick, Adam Hirschkatz, Blanca
Rodriguez Montero, Janani Raman,and Lauren Rodgers. The authors
also acknowledge the support of
Hady Farag, Brett Schiedermayer,
and the Value Science Center, which
supported the valuation analysis, aswell as Dawid Gurga and Eileen
Butler at GAMMA, who supported
the margin analysis.
They would also like to thank theoutside experts whose views andinsights helped shape the report.
This includes the numerous
executives from companies thatwere interviewed for this reportand served as thought partners in
the development of this topic:
Airbnb, ArcelorMittal, Bank ofMontreal, Borealis, BP, Campbell
Soup Company, Comerica, DHL,
eBay, Facebook, Ferring
Pharmaceuticals, Gilead Sciences,Mars, Mastercard, Merck & Co,
Microsoft, PepsiCo, Pfizer, The PNC
Financial Services Group, Solvay,
Standard Bank, Teva PharmaceuticalIndustries, Thomson Reuters
Corporation, Total, Unilever, andVisa.
They would like to thank thefollowing people who wereinterviewed to provide theperspective of the investor
community, in particular, Derek
Bingham (Goldman Sachs), Robert
Brown ( JUST Capital), Elaine Chan
Wei Hsing (Government Investment
Corporation of Singapore), Annie
Chen (RS Group), Michelle Edkins(BlackRock), Daniel Hanson( Jarislowsky Fraser), Erica Karp
(Cornerstone Capital Group), Leonie
Kelly (RS Group), Andy Knauer( JUST Capital), Ronie Mak (RSGroup), Jamie Martin (Morgan
Stanley), Chris McKnett (State
Street Global Advisors), Clara Miller(Heron Foundation), Maureen
Mitchell (formerly of GE AssetManagement), Andrew Morales(Wellington Management), Keren
Raz (Apollo Management), Ignacio
Sarria (New Mountain Capital),
Anna Snider (Bank of America ML),
Sarah Williamson (FCLT Global),
Deborah Winshel (BlackRock), Katy
Yung (RS Group), and Eva Zlotnicka(Morgan Stanley).
They would like to thank additional
outside thought partners who
provided input on the topic. In
particular, they would like to thankseveral employees at the
Sustainability Accounting Standards
Board. They include: Andrew
Collins, Henrik Cotran, Anton
Gorodniuk, Eric Hespenheide, Eric
Kane, David Parham, Eli Reisman,
Levi Stewart, and Quinn Underriner.
Additionally, the authors
acknowledge the thought
partnership with members of the
CECP, including Tim Youmans,
Mark Tulay, and Sarah Bostwick.
The Boston Consulting Group | 53

NOTE TO THE READER
The authors would like to thank thefollowing BCG colleagues, whoprovided invaluable guidance on
industry-specific content: Ashwin
Adarkar, Ramón Baeza, Brent
Beardsley, Maurice Berns, KilianBerz, Rolf Bixner, Marcus Bokkerink,
Jim Brennan, Charles André
Brouwers, Sarah Cairns-Smith, Priya
Chandran, Michael Choy, Jorge
Colado, François Dalens, Julien
Dangles, Laurent Desmangles,
Alexander Meyer zum Felde, Michel
Frédeau, John Garabedian,
Alexandre Gorito, Jim Hemerling,
Brad Henderson, Bruce Holley, JT
Hsu, Richard Hutchinson, Adam
Ikdal, Jean-Manuel Izaret, Udo Jung,
Hemant Kalbag, Ken Keen, Derek
Kennedy, Jake Leslie Melville,
Zhenya Lindgardt, Claire Love, Mark
Lubkeman, Amyn Merchant, Euvin
Naidoo, Emmanuel Nazarenko,
Johan Öberg, J. Puckett, Michael
Ringel, Tal Rosenbloom, Michael
Rüßmann, Pablo Ruiz Rodriguez,
Rohan Sajdeh, Vinay Shandal,
Rebecca Solow, Henning Streubel,
Steve Thogmartin, Alan Thomson,
Peter Tollman, Pablo Tramazaygues,
Jean Francois van Kerckhove, Elliot
Vaughn, Merel Venneman, Ian
Walsh, John Wenstrup, and Zia
Yusuf.
The authors acknowledge the contributions and efforts of key members of the Social Impact practice
who supported this study, especially
Brenda Thickett, Taylor Tinmouth,and Susie Margolin. They also
thank the support of the Legal andContracts team, particularly Linda
Costa and Jennifer Fessler.
The authors thank Amy Barrett forher contributions to the writing of
this report and Katherine Andrews,
Gary Callahan, Kim Friedman, Abby54 | Total Societal Impact

Garland, Amy Halliday, and Sean
Hourihan for their contributions to
the editing, design, and productionof the report.

For Further Contact

To discuss this report, pleasecontact one of the authors.
Douglas Beal
Director, Social Impact
BCG Hong Kong+852 2506 2111
beal.douglas@bcg.com
Robert Eccles
Senior Advisor
robert.eccles@sbs.ox.ac.uk
Gerry Hansell
Senior Partner and Managing Director
BCG Chicago+1 312 993 3300
hansell.gerry@bcg.com
Rich Lesser
President and CEO
BCG New York
+1 212 446 2800
lesser.rich@bcg.com
Shalini Unnikrishnan
Partner and Managing Director
BCG Chicago+1 312 993 3300
unnikrishnan.shalini@bcg.com
Wendy Woods
Senior Partner and Managing Director
BCG Boston+1 617 973 1200
woods.wendy@bcg.com
David Young
Senior Partner and Managing Director
BCG Boston+1 617 973 1200
young.david@bcg.com

The authors thank Tufts
University’s Fletcher School’s
Institute for Business in the Global
Context for supporting thebackground research on companies’
ESG reporting. In particular, they
thank Bhaskar Chakravorti, Michael
Cretz, and Athul Ravunniarath.

The authors acknowledge thecontributions from the two ESG
data providers: MSCI and Oekom
Research.

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Certain information ©2017 MSCI ESG
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Further, without limiting any of theforegoing, in no event shall any of the
ESG Parties have any liability for any
direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of thepossibility of such damages.

Certain information ©2017 OEKOM
Research AG. Reproduced by permission; no further redistribution. Although BCG’s information providers,
including without limitation, OEKOM
Research AG and its affiliates (the“ESG Parties”), obtain information

The Boston Consulting Group | 55

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