#10 Is Your Company a Volvo?

A difficult week for Volvo, but a lesson that every company can learn from.

The dramatic chart below is an impactful illustration of how ineffective ESG can destroy value.

Is the same thing happening in your company, without you knowing?

3 min read

What Happened?

Earlier this week, Volvo back-tracked on its promise to sell only fully-electric cars by 2030 (a commitment it made just three years ago).

Its share price is currently 13% lower than it was in the lead up to the announcement, wiping £840m off its market value.

Not all companies are publicly traded and have the benefit (if you choose to see it that way!) of such direct real-time feedback.

In response to every event and announcement, the market reaction quantifies how it believes the value of a business has been affected.

And the market's reaction to Volvo's EV U-turn is stark.

Destroying Value

This is indicative of ineffective ESG more widely.

Most companies struggle - either with a lack of clear priorities and strategy, or failing to implement initiatives successfully.

This comes with a huge hidden cost.

Not just the direct expense of implementing these things, nor the time being sunk into them.

The impact these have on a P&L can be easily quantified (although the latter is too often ignored).

More significant is the overall drag on productivity and value creation.

The more time and energy being wasted on ineffective ESG, the more this reduces buy-in and alignment internally, and the more difficult it becomes to implement sustainability and social impact initiatives.

People just see it as a waste of time.

This poses long-term risks and destroys value.

Finding Out Too Late

Not every company is publicly traded and confronted with scary red charts, which can at least serve as a wake-up call to management to change course.

For privately owned companies, the external appraisal can come too late.

It might not be until a funding round or exit process is in full swing, and valuation is undermined by shortfalls uncovered in the company's ESG practices (an increasingly important part of due diligence).

Make sure you are not unknowingly eroding value in this way - it will come at a big cost down the line.

Turning Risk into Upside

The big opportunity here is that ESG can be a source of value creation.

As other editions of this newsletter have covered, there are huge advantages to be gained and financial upside to be unlocked from getting it right.

ESG must be integrated into the business, and initiatives treated like any other project or workstream.

There needs to be a clear understanding of the positive impact on performance that can be achieved across the business.

This will identify the important metrics and enables targets to be set.

In turn, this allows for the creation of detailed action plans and clear responsibilities assigned.

You can then track progress and course-correct as you go, ensuring you are achieving the direct ESG goals whilst also achieving a measurable improvement in financial performance.

The Towards Better methodology shows you how to do this and provides all the tools and techniques to implement successfully - let me know if it would be of interest.

Next Week….

For those of you expecting this edition to focus on opportunity costs (as promised last week), don't worry - that will be coming your way very soon!

As always, please share any thoughts or feedback by replying to this email.

The journey towards a better way of doing business

We are on the cusp of a new paradigm of responsible business, and helping impactful companies pair purpose with profit will accelerate the shift.

I believe this holds the key to solving many of our greatest challenges and inspiring positive change throughout society.

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