Embracing ESG: The Key to Sustainable Success

In today's dynamic business environment, environmental, social, and governance (ESG) practices have become a cornerstone of responsible corporate citizenship. Mexico has made significant strides in developing regulatory frameworks that encourage companies to integrate ESG considerations into their operations, moving beyond mere compliance to embracing ethical and sustainable practices that benefit all stakeholders. The Mexican Stock Exchange's Sustainable Prices and Quotations Index (Sustainable CPI) is a testament to this progress, providing a platform for companies to demonstrate their commitment to the environment, social responsibility, and good governance.

The COVID-19 pandemic has heightened Mexicans' awareness of environmental and social issues, driving demand for companies that adopt ESG practices. But have we really created a robust culture of sustainability? Our recent Consumer Pulse 2024: Mexico report highlights a significant shift in consumer behavior, with a growing inclination toward balancing financial and environmental sustainability. This trend underscores the importance of companies adopting eco-friendly measures while navigating individual financial constraints.

For younger generations, in particular, it is crucial that the brands and companies they engage with are proactive in their sustainability efforts. This encompasses not only ecological initiatives but also support for various sectors or the community. While 90% of respondents express concern for sustainability, the willingness to pay for sustainable options remains relatively low due to financial limitations. Only 24% of Mexicans are willing to pay more for sustainable products, emphasizing the need for sustainability initiatives that do not necessarily translate to higher costs for consumers.

Although sustainability has become an important factor in the purchasing process of Mexicans, the willingness to pay for sustainable products remains low, which distances consumers from a more sustainable shopping basket. So, how do we expect to consolidate a sustainable culture on a large scale? The answer lies in the corporate sector.

The journey toward a more sustainable future requires a collective effort from all stakeholders, including companies, consumers, and policymakers. By aligning their business practices with ESG principles, companies can mitigate risks and enhance their reputation, unlocking new opportunities for growth and innovation. Consumers, on the other hand, can play a crucial role by supporting companies that prioritize sustainability and holding them accountable for their actions.

Our report, Do ESG Efforts Create Value?, evaluated the impact of ESG criteria on a vast sample of 100,000 companies, with 80% being private entities. The study yielded four key findings on the business opportunities derived from ESG practices:

• Companies with a higher representation of women in executive teams tend to achieve better financial results.

• The adoption of renewable energy sources contributes to higher EBITDA margins in industries with high carbon emissions.

• Companies that prioritize ethical, environmental, and labor practices within their supply chains tend to be more profitable.

• ESG leaders demonstrate higher levels of job satisfaction, fostering a conducive environment for profitability and rapid company growth.

These insights have been instrumental in identifying the evolving landscape within companies, the improvements in their ESG practices, and the trajectory toward a more sustainable future. As businesses worldwide increasingly acknowledge the significance of ESG criteria, companies must create strategies that integrate these principles, driving value, fostering innovation, and spurring growth. Embracing ESG is not merely a regulatory obligation, but a shared commitment that enhances corporate responsibility and paves the way for sustainable success in the long run.

Policymakers, too, have a significant part to play in shaping the ESG landscape. By implementing robust regulations and incentives, they can encourage companies to adopt sustainable practices and drive innovation in the field of sustainability. The Mexican government's recent initiatives, such as the Sustainable CPI, are a step in the right direction, but more can be done to create a conducive environment for companies to thrive while prioritizing ESG.

Bain & Company's proactive stance on sustainability and responsibility practices on a global scale has solidified our position as leaders in the field. Our formal certification as a 100% Carbon Neutral® company across all our global operations since spring 2012 underscores our unwavering dedication to sustainability. Our recertification for the 10th consecutive year in 2020, recognized by Natural Capital Partners, is a testament to our enduring commitment to environmental stewardship.

We believe that the future of business lies in the integration of ESG principles into the core of corporate strategy. By embracing ESG, companies can contribute to a more sustainable world and position themselves for long-term success in an increasingly competitive and conscious market. The commitment to sustainability and social responsibility should not be just a fashion statement but a banner within the identity of the companies, transferring it to their entire value chain. This ensures that, in the corresponding industries, consumers can access these alternatives more easily.

As we look to the future, we remain steadfast in our mission to help companies navigate the complexities of ESG and unlock the value inherent in sustainable practices. Through our research, insights, and partnerships, we will continue to champion the cause of responsible business management and inspire others to join us in our quest for a more sustainable and equitable world. Together, we can create a future where business success and environmental stewardship go hand in hand, paving the way for a better tomorrow for all.