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  • September–October 2022
  • Article
  • Harvard Business Review

The Essential Link Between ESG Targets and Financial Performance

By: Mark R. Kramer and Marc W. Pfitzer
  • Format:Print
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Abstract

Despite heightened attention to environmental, social, and governance (ESG) issues, surprisingly few companies are making meaningful progress in delivering on their commitments. Most firms are not integrating ESG factors into internal strategy and operational decisions and are giving investors little to no explanation of the impact of ESG performance on corporate earnings. To integrate ESG efforts into their core business models, firms should take these steps: (1) Identify the ESG issues material to the business; (2) factor in ESG effects when making strategic, financial, and operational decisions; (3) collaborate with stakeholders; (4) redesign organizational roles; and (5) communicate with investors.

Keywords

ESG; Environmental Sustainability; Social Issues; Governance; Financial Strategy; Decision Making; Business and Stakeholder Relations; Organizational Structure

Citation

Kramer, Mark R., and Marc W. Pfitzer. "The Essential Link Between ESG Targets and Financial Performance." Harvard Business Review 100, no. 5 (September–October 2022).
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    Engine No.1: An Impact Investing Firm Engages with ExxonMobil

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    • October 2021 (Revised May 2023)
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More from the Authors
  • Engine No.1: An Impact Investing Firm Engages with ExxonMobil By: Mark R. Kramer
  • Engine No. 1: An Activist Hedge Fund Pursues Stakeholder Capitalism (B) By: Mark Kramer
  • Engine No. 1: An Impact Investing Firm Engages with ExxonMobil By: Mark Kramer, Shawn Cole, Vikram S. Gandhi and T. Robert Zochowski
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