Baringa shows ESG prioritisation leads to corporate success
Companies considered kind are more likely to experience stronger growth, according to new analysis by Baringa.
Research by the UK based management consultancy firm concluded that between 2012-2022, businesses with a reputation for kindness — including prioritisation of sustainable and ethical practises across the supply chain — were 35% more likely to have doubled their earnings before interest, tax and amortisation (EBITDA) than companies with a reputation for being unkind. Likewise unkind companies were 20% more likely to have seen their EBITDA shrink in the same period when compared to kind companies.
ESG prioritisation key for financial success
The results indicate that firms perceived to take actions commonly associated with kindness — including treating their staff or suppliers well, or taking public stands on ethical issues — are more likely to succeed than those with a reputation for ruthlessness or self-interest.
“Doing the right thing is too often dismissed as woolly, soft, or somehow not worthy of red-blooded capitalism,” shares Anya Davis, Energy Transition Partner at Baringa.
“These figures prove that it is the opposite. If you are perceived as kind, you are also more likely to grow faster. This is a correlation that hints at a reassuring truth: kindness and business success are mutually-compatible, not mutually-exclusive.
“Kindness also provides a lens for businesses to plan and evaluate strategy. Once you have decided on a course of action, take a step back and question whether it is kind. If it is not, consider amending it or scrapping it.”
As ESG strategy and reporting becomes an increasingly compulsory part of global industry, consumers are paying attention.
Embracing ESG — the smart move
Baringa polled 6,028 people in seven countries, and asked them to name a company they considered “kind”, and a company they considered “unkind”. It then compared this data to those companies’ EBITDA over the course of ten years and consistently found that the companies considered kind fared better than unkind businesses.
- Taking a benchmark of 5% annual EBITDA growth, compounded over a decade, as being a desirable minimum for any firm: 55% of “kind” businesses grew by this rate or more, compared to just 41% of companies considered “unkind”.
When Baringa examined the industries whose companies are most likely to be listed as kind or unkind, technology was the most frequently cited as kind, followed by retail. By contrast e-commerce was most likely to be cited as unkind, followed by food and beverage, and fashion.
“Doing the right thing by people and the planet is good for the world and good for business, so we should not ditch ESG as being anti-business – we should embrace ESG because it’s pro-business,” Davis continues.
“The issue of kindness in business is wider than a question of consumer purchasing choices, but looking at consumer purchasing choices is still instructive: Baringa’s research indicates that 61% of people across the globe have refused to buy a product or service in the past two years because they considered the vendor to be unkind. 76% of people sometimes or always consider the behaviour of a company or its leadership when making a purchase. The lesson here is people do not make purchases purely on price or function. Kindness and ethics are part of the intangible criteria weighed up by customers across business, and a firm who ignores these factors will be doing itself and its stakeholders a long-term disservice.”
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