For me, one of the highlights of 2025 to date has been working with GlobeScan and the ERM Sustainability Institute on the Sustainability at a Crossroads survey. The responses from around the world persuaded me that “the zeitgeist is shifting towards the sort of scenarios and solutions highlighted in this ‘Rewilding Markets’ series.”
But, for me at least, the most surprising result was this: More than nine in ten of experts agree that a shift is needed with over half calling for a “radical” overhaul. I was surprised not by the reality respondents are seeing but by their apparent willingness to consider radically different trajectories and solutions.
As the Trump Ascendancy has built, and so much of our language has been politicized and pilloried, I have been thinking of the language we need to use as we now take the sustainability agenda forward. And a sharp nudge was given to my thinking when I went across to the Imperial Business School’s Leonardo Centre for Business for Society this week to film an interview with Maurizio Zollo. He is Professor of Strategy & Sustainability at the Imperial Business School and the Centre’s Scientific Director.
Linking sustainability and financial performance
As I was leaving, Maurizio handed me a copy of their latest working paper, “Which sustainability actions boost shareholder returns and which hinder them? Among other things, it concludes that:
The relationship between sustainability and financial performance has long been a central concern for business leaders, investors, and academics. Despite decades of research, the question remains unresolved: Does it pay to be sustainability-focused? Is there a positive, neutral or negative correlation between firms’ sustainability performance, as captured by ESG scores, and shareholder returns?
The status quo in answering these questions is, unfortunately, a state of “aggregate confusion”, as shown by recent research work from MIT. Both academic and practitioner research yield conflicting or, at best, inconclusive, results. The core issue lies in the fact that most of the debate and related research has focused on assessing firm-level attributes tied to the quality of their impacts ...
... What is missing is a systematic, quantitative, and objective evaluation of what firms are actually doing to realise their impact ambitions on society and the environment.
This report proposes an innovative approach to tackle this structural problem by presenting a new assessment system for corporate impact, based on the systematic, structured evaluation of observable corporate sustainability behaviours.
The study draws on the GOLDEN Sustainability Dataset—developed as part of the Centre’s work. This is described as “the largest structured dataset of its kind, containing over 1 million initiatives from 15,000 companies across all sectors and headquartered in more than 80 countries.”
That is now high on my priority list to understand more about. But, meanwhile, and in headlines, we are told that the methodology has operated as follows:
The dataset is used to develop and test a novel empirical framework to explore the relationship between business impact maturity and financial performance. The corporate initiatives were identified and categorised through state-of-the-art natural language processing (NLP) algorithms according to their objectives (using the 17 UN SDGs) and their behavioural content (14 categories of sustainability actions, mutually exclusive and exhaustively covering all reported actions).
For the analysis, the Centre organised the 14 action types into three broad categories:
1. Advocacy: Externally oriented actions such as donations, volunteering, and community engagement.
2. Preparation: Internal efforts like training, incentives and the introduction of impact measurement systems.
3. Transformation: Organisational and operating change, as well as innovation-driven initiatives embedded in products, business models, and value chain partnerships.
This taxonomy, built from an underlying “impact maturity model,” allows for cross-sectoral benchmarking, temporal analysis, and direct connection to both financial performance and environmental impact.
Transformation is the key
The methodology may—and necessarily—be complex, but the conclusion is simple. Transformational sustainability actions drive superior risk-adjusted shareholder returns. As the Leonardo Centre team sum up their findings:
Portfolios created by selecting companies in the highest tertile of Transformation initiatives outperform market returns and portfolios created with companies in highest tertiles of Advocacy or Preparation actions. This effect is strong on an absolute level, with a 2.7% annual alpha, translating into a 40.7% cumulative, risk-adjusted, abnormal return over the 13 years of observation of the study.
By contrast, high levels of “Advocacy” behaviour—often associated with “greenwashing”—correlate with lower financial performance. ESG ratings, on the other hand, disproportionately reward “Preparation” stage initiatives—those most visible, auditable, and risk-focused—yet these assessments are not positively correlated with improvements in company performance, measured either accounting or as financial terms.
Watching my language
So, when it comes to my own language, I am increasingly persuaded that I ought to be using the term transformationto explain what we are now aiming for. Economic, social, environmental—and, yes, political.
But when I think of transformation, I suspect that I am thinking wider still than the Leonardo Centre in this latest study. As indicated in this Substack series, I am thinking of the transformation of markets, economies and, ultimately, of economics itself. And, again, of politics, in service of the true interests of future generations.
Clearly, transformation is already happening, though too much of it is dictated by the values of folk like the “Tech bros” (among them Altman, Musk and Zuckerberg) and the Chinese Communist Party. With the greatest of respect, their ascendancy, too, now needs to be more forcefully and effectively challenged in the interests of the values distilled into the sustainability agenda—and, though they are no sort of industrial strategy for the world—the UN Sustainable Development Goals.
John Elkington is Founder & Global Ambassador at Volans. His personal website can be accessed here and his professional website here. His latest book is Tickling Sharks: How We Sold Business on Sustainability (Fast Company Press, 2024). Available on Amazon and through good bookshops:
Thank you- what occurs to me is a need for meaning and understanding of transformational as a word. I look forward to your future thinking as to how to enable shared meaning and consequently shared action to co-created transformation
This comment from Maurizio Zollo went onto LinkedIn, which I shall repost here:
Maurizio ZolloMaurizio Zollo
Founder/Director, Leonardo Centre on Business for Society at Imperial College London
Thank you, John Elkington, for this lucid reflection on the Leonardo Centre on Business for Society's latest report "Which sustainability actions boost shareholder returns and which hinder them?".
You are absolutely right, of course, this new approach, based on the systematic assessment of corporate sustainability actions, allows us to go beyond the current ESG ratings and indeed identify the transformational actions (innovations, change, value chain cooperation) that generate a very large alpha for investors, vis-a-vis all the other actions that don't.
Moreover, it explains why the evidence on the correlation between ESG ratings and firm performance is so elusive to find. They are simply rewarding risk minimization actions (impact measurement, HR training, etc.) which are at best preparatory for value creation, but do not generate value per se. That is what ESG ratings were created for, minimizing investors' risks, and that is what they deliver.
To assess companies' capabilities to generate synergies between impact and profit, we need to look beyond ESG and focus on truly transformative actions. Our dataset, currently covers 1.8 million actions in 75000 reports by 18,000 companies across 86 countries, is a solid basis to move the global conversation on what really matters for companies, beyond the (important but insufficient) moral and compliance elements.