Environmental, social, and governance (ESG) goals are part of nearly every large company’s agenda. But with ESG criteria coming under increasing scrutiny and corporate budgets getting squeezed, do CEOs who courageously pursue sustainable and inclusive growth deliver for shareholders?
We’ve known for some time that C-suite leaders who chase growth without considering how their strategies could impact people, the planet, and their firm’s long-term sustainability increase reputational risk. New McKinsey research now reveals they are also less likely to lead their companies to full growth potential.
We analyzed a comprehensive set of performance metrics for the 10,000 largest global companies spanning 2016–22, with a particular focus on the past five years, a period of unprecedented upheaval that saw the world move from a low-interest-rate, relatively calm business environment to one roiled by the COVID-19 pandemic, generationally high inflation, deepening geopolitical tensions, accelerating climate events, and the rise of generative AI.
Our findings reveal that while strong ESG scores do not compensate for weak fundamentals, “triple outperformers”—companies that achieve stronger growth and profitability than their peers while improving sustainability and ESG scores—deliver two percentage points greater annual excess TSR than companies that excel only on financial metrics (exhibit). Between 2017 and 2021, a period where fewer than one in four companies enjoyed annual revenue growth in excess of 10 percent, more than half of triple outperformers reached or exceeded that benchmark.
“CEOs are navigating an increasingly demanding business landscape where their every move is dissected like never before,” said McKinsey senior partner Michael Birshan. “Our research suggests that not only can companies do well while doing good; they can perform better because of it.
Boosting shareholder returns with sustainable, inclusive growth is one of six strategies for continuous growth outperformance we’ll explore in our forthcoming report, Courageous Growth, the latest installment in our landmark research series for C-suite leaders who explicitly choose growth, activate pathways to drive it, and master our ten rules for achieving it.
Because even when funding is scarce and the economic outlook is uncertain, C-suite leaders who commit to growth and stay the course by maintaining a through-cycle mindset steward their companies to the pinnacle of growth performance.