A good sign that proves a movement is worthwhile is the clear evidence of progress. ESG is not only focused on improving communities, the planet, and workplace conditions, but it's also proving to enhance business operations, increase shareholder value, and deliver long-term benefits to investors. For the longest time, the financial merit of ESG was difficult to validate, as it was seen more as a philosophical investment. However, as companies progress along their ESG journey, proper metrics are starting to emerge.

Even with regulations demanding companies provide specific numbers, business processes that measure environmental impact, for example, do not always equate to dollar figures. However, a recent study from Bain & Company and EcoVadis does show promise that ESG activities do correlate to strong financial profitability and growth.

The only catch is that this study focused heavily on private firms.

Even with that slight wrinkle, their study looked at 100,000 companies, with 80% of them being private businesses. So, chances are quite high that adopting ESG activities like sustainability, diversity, and employee satisfaction will yield great results, which in turn lowers costs, raises quality and profits, and is an attractive example for investing.

Featured Article: The Top 3 Visible Benefits Of ESG Investing

General Details

For this study, EcoVadis revealed scorecards that measured a broad range of ESG activities. Some of them include:

• Carbon reduction practices
• Improving DEI (diversity, equity, inclusion)
• Sustainability in management processes
• Sustainable procurement

From these aspects alone, the study was able to prove that those scoring well in these categories also had better financial overall performance.

These findings make a strong case for ESG reporting as a crucial business practice. Companies scoring higher in these categories consistently reported stronger financial performance.

Featured Article: The Growing Need for ESG Companies, Sustainability, and Climate Solutions

Gender Diversity and ESG Values: A Catalyst for Higher Revenue Growth

To start, the study highlighted a connection between businesses that had more women on their executive teams and profitability. It noted that annual revenue growth was approximately 2% higher for companies that had fewer women on their teams. But what's also interesting is that this was the same case for companies that ranked in the top 25% of their respective industries for executive team gender diversity; it's important to note that they enjoyed greater shareholder value.

This coincides with several studies over the years showing the overwhelming benefit of including more women in executive teams. Women provide newer perspectives, can lead more effectively, are better communicators, and are more empathetic, thereby leading to stronger ESG-related decisions. Naturally, this positively impacts decision-making processes and leads to greater potential profitability through improved operations.

Renewable Energy and ESG Strategy: How Clean Power Boosts EBITDA

The study also found slight advantages for companies that focused on renewable energy usage. There was a correlation with higher EBITDA (earnings before interest, taxes, depreciation, and amortisation). This was especially prominent in sectors like natural resources, transportation, and industrial goods.

Despite renewable technology being pricey upfront, it's clear it's well worth the investment, as focusing on renewable energy sources now and divesting from fossil fuels, can ensure far more efficiency when late adopters come onboard. Such shifts are critical to an effective ESG journey. Also worth noting is that many of these organizations actively set ESG targets related to emissions reduction and energy sourcing.

Featured Article: Top 10 Sustainable Businesses: Inspiring Practices for 2025

ESG Value Creation Through Sustainable Supply Chain Models

A larger problem that big corporations a is in their supply chain management. With so many contractors and outsourcing, it's a nightmare to navigate. However, the effort is well worth it, despite the headaches. You can see this when you look at private businesses in this study.

When it comes to supply chain models, companies have margins 3 to 4% higher than those that don't focus on suppliers' ESG credentials. These credentials would not just focus on environmental concerns as a company's objective, but also on hiring practices, employee engagement, ethics, and how all these values are closely related to stakeholder treatment within supply chains, reflecting deliberate ESG-related decisions. Ultimately, these choices reinforce shareholder value while aligning with modern governance expectations.

ESG Initiatives That Improve Employee Satisfaction and Business Value Creation

Just as much as ESG leaders focus on these broad business changes, they still look out for their employees. That much is clear from the fact that the study found higher rates of employee satisfaction when the employees knew someone was guiding, motivating, and supporting them at work. Employee engagement that leads to greater well-being can significantly affect the ability to improve efficiency.

That in turn correlated to more profitability and rapid growth. Putting some numbers to it, the study found a three-year revenue growth of up to 5% above those with less satisfied staff. They also enjoyed margins that were at least 6% higher. This tells us that when businesses set ESG targets around well-being and development, value creation follows.

Featured Article: Climate Solutions: The World’s First ESG & Sustainability Marketplace

Still Room To Grow And Make An Effort

Ultimately, this study sheds a lot of light on ESG and how helpful it truly is. And the best thing about this work is that it shows this is only the start. As the study pointed out, only 35% of large private companies are achieving these top scores and creating new opportunities with employees and stakeholders that lead to success, as with the few examples of benefits mentioned above.

For large public companies, that number is 53%. That leaves plenty of room for new adopters. This leaves ample room for newcomers to embrace ESG principles and move forward in their ESG journey.

But the biggest victory that this study reveals is that, for the companies involved, it serves as an excellent case study for ESG effectiveness in business. Again, many organizations that oppose ESG tend to argue that it doesn't improve financial performance or say that it's difficult to measure how profitable a company can be when it considers these approaches.

But now this study makes it clear, and it shows that there is profit and growth to be had in this area. That's great news not just for the organization involved, but also for its stakeholders, existing customers, and consumers alike. And it's only just starting.

Follow more news and views via our Featured Articles, and stay updated on top ESG events to attend in 2025 for industry insights and networking.

Frequently Asked Questions (FAQs)

1. What is ESG value creation, and why is it important for businesses?

ESG value creation refers to how companies generate long-term financial and non-financial value by integrating environmental, social, and governance (ESG) factors into their business model. By embedding ESG principles, businesses can reduce risk, improve financial performance, and strengthen stakeholder relationships, ultimately supporting sustainable growth and enhancing market positioning.

2. How do ESG initiatives impact financial performance?

ESG initiatives such as energy efficiency, waste reduction, and diversity and inclusion programs can lead to cost savings, improved operating margins, and increased employee satisfaction. Research shows a direct link between strong ESG performance and better financial returns, as companies become more attractive to investors, customers, and top talent.

3. How can ESG efforts reduce business risks?

ESG efforts help companies minimize regulatory, legal, and reputational risks by proactively addressing sustainability issues like climate change, carbon emissions, and labor standards. Effective governance initiatives also help prevent reputational damage and ensure responsible investment decisions.

4. In what ways can ESG create long-term value for stakeholders?

ESG creates long-term value by enhancing stakeholder trust, improving employee engagement, reducing disposal costs, and lowering the carbon footprint. These actions support sustainability goals, contribute to local communities, and drive competitive advantage in an evolving global marketplace.

5. What are some key ESG metrics companies should track for value creation?

Companies should monitor ESG metrics such as greenhouse gas emissions, supply chain sustainability, carbon footprint, employee turnover, and corporate governance practices. These indicators help assess the effectiveness of sustainability initiatives and guide ESG-related decisions that support long-term value creation.

6. How does ESG strategy support sustainable finance and investment?

A well-defined ESG strategy attracts sustainable finance by aligning with investor values and mitigating long-term risks. It improves capital allocation, enhances net margins, and supports the development of sustainable products, making it easier for companies to access invested capital and achieve financial outcomes aligned with global sustainability commitments.

7. How do ESG activities contribute to a company’s competitive advantage?

ESG activities like renewable energy adoption, ethical supply chains, and human rights policies help companies differentiate themselves in the market. By addressing environmental impact and enhancing corporate social responsibility, businesses can improve their reputation, attract loyal customers, and gain a competitive advantage in industries increasingly focused on sustainable value.

8. What role do ESG goals play in driving business innovation and growth?

Setting clear ESG goals encourages companies to innovate by developing sustainable products, adopting clean technologies, and rethinking resource use. These innovations not only reduce carbon emissions and climate-related risks but also unlock new revenue streams and drive long-term value for investors, employees, and other stakeholders.

Last updated on June 9, 2025, by Mamata Saha.