While ESG factors and incentives are much discussed; we should not lose sight of delivered profit.
Current year max profit does not mean max shareholder value; but profit remains a vital part of the corporate purpose and health.
The core business profit is delivered from revenue minus cost. That is a big job and the task of many functions.
But all businesses come under profit pressure in time – from new entrants, technology, supplier or customer pressures, tax, and regulatory change and so on.
Refreshing core profit is essential to replace this predictable profit attrition. Getting that to work well is an important part of strategy high on the board agenda lead by the CEO.
The do-nothing choice is an easy road; but then the “boiled frog” inertia risk will become acute.
ESG has its role; profit does too. Getting the balance right and delivering on all stakeholder expectations, including shareholder returns is important.