ESG factors, a great opportunity to increase financial profitability
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Donna Barrera S., expert in Sustainable Business and Innovation, Alumni Promociona.

Donna Barrera S., expert in Sustainable Business and Innovation, Alumni Promociona.

Today ends COP 27, the Annual Conference of the United Nations where the leaders of more than 190 countries meet to generate agreements on how to deal with climate change that affects millions of people. In our country, we see important advances in terms of legislation, consumer behavior and new market trends; however, the overall results to date are not very encouraging.

The latest report from the Intergovernmental Panel on Climate Change notes that nations’ climate plans remain insufficient and that current actions will lead to a global temperature rise of 2.5°C by the end of the century, with devastating consequences for the people living on the planet. To maintain the proposed goal of not exceeding 1.5°C, we need a reduction of at least 45% in emissions in the next eight years, which poses a major challenge for society, countries and organizations.

A few weeks ago, the Harvard Business Review (HBR) magazine published an article indicating that the main gap (and, in turn, the main opportunity) is the lack of connection between sustainability and the financial performance of businesses. He points out that having internal business strategies integrated with ASG sustainability factors are the key to accelerating the results necessary to combat this climate crisis from the private sector. One of the key actions to be implemented is to consider the ESG factors that have the greatest impact on the business as the main input for internal strategy, integrating the financial impact of these factors and redesigning a business strategy focused on seeking new opportunities to boost business growth. business and its financial profitability.

The business strategy of Discovery, a global life and health insurance company, is one of the examples mentioned by HBR. Discovery incorporated the health of its clients, its main ESG risk factor, as a focus of its business strategy. It redesigned its business model by implementing a reward system to improve the health habits of its clients, evaluating the cost of incentives and their impact on their behavior, regarding lower medical and health costs. The integration of the health of their clients as a main component of their strategy has allowed them to create a unique competitive position in the market, expand globally and have a higher profitability than their competitors, with 15% less medical costs and with a life expectancy of its customers 10 years longer than its competitors.

There are several companies in the world, and also in our country, that are already incorporating their ESG risk factors into their business strategy. However, this integration must be accelerated given the urgency of this climate crisis. To the extent that more companies integrate sustainability into their business strategy and obtain positive results in their financial statements, there will be more evidence that this is the path to be a profitable business in the long term, and therefore, a model of sustainable business that captures these profitability opportunities, contributing from the private sector to achieve the global objective of not exceeding 1.5°C, ensuring our survival and that of future generations on our planet.

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