Why do CEOs not hesitate to invest in training, a new plant, or IT equipment but when it comes to investing in the future of our planet or society, they think twice?
More than 1 trillion dollars have been poured into ESG funds over the past 2 years. It seems as if everyone now understands the business case for sustainability/ESG. However, when it comes actually making these decisions at the company level, many leaders still see an inherent trade off between investing in a more sustainable future and achieving business growth and profit.
In this article, Paul Polman and Andrew Winston argue that this is primarily due 5 factors that influence how we make decisions:
We are not aware of the real cost: we need to price the 'unpriced' i.e. the externalities
We are set in our ways and have biases: ensure diverse voices are heard in the decision-making process
We focus too much on the short term costs and benefits: redefine your tools for investment decisions
Our definition of 'costs' is too narrow: we need to broaden our thinking on value and think in systems
And we miss the bigger, existential costs: we need to think about the world's thresholds and give back more than we take.