Would you give away a $3 billion company? Patagonia’s Yvon Chouinard did exactly that. Here’s why.
Perhaps more than at any point in human history, purpose is finding a greater footing in boardroom conversations. In fact, there has been a fivefold growth in internet searches for ESG criteria (Environmental, Social, and Governance) since 2019, and companies of all sizes across industries and geographies have been allocating more resources toward improving ESG. More than 90 percent of S&P 500 companies now publish ESG reports in some form, which are now becoming increasingly mandatory or under active consideration.
Investments bear out the rising importance of ESG, with inflows into sustainable funds rising from $5 billion in 2018 to more than $50 billion in 2020—and then to nearly $70 billion in 2021. Midway through 2022, global sustainable assets are about $2.5 trillion. A major part of ESG growth has been driven by the environmental component of ESG and responses to climate change. But other components of ESG, in particular the social dimension, have also been gaining prominence, perhaps fuelled by human tragedies such as the war in Ukraine.
However, critics argue that the focus on ESG may be remembered as merely a fad, representing a pastiche of odd combinations. Concurrently, challenges to the integrity of ESG investing itself have been multiplying, but the core question really is this; does ESG really matter to companies, and what is the rationale to pursue it?