Family businesses have an opportunity to lead on ESG: PwC

Punching above their weight

To explain why family business could play such an outsized role in furthering ESG goals, it’s useful to look at the wider ESG landscape. The move to embrace sustainability is already a seismic shift for businesses, powered by massive expectations from stakeholders, ambitious commitments from governments, and a tidal wave of capital investment. ESG funds, for example, attracted a record $51 billion of net new money from investors in 2020, more than double the amount the previous year. Large publicly held corporations and governments, through both sticks (regulations) and carrots (targeted subsidies) are reshaping the way business operates. And indeed, many corporations are stepping up: they are making commitments to reduce carbon emissions and sourcing electricity from renewable resources; they are making their boards more diverse and publishing sustainability reports. 

But today, such actions are just table stakes. To build trust and secure their futures, businesses must go further and build ESG into all aspects of their business: their reporting, strategy, and transformation plans. And family businesses are uniquely positioned and incentivized to do so for a couple of key reasons. First, they are more trusted than any other sectors. Some 67% of respondents in the Edelman Trust Barometer’s 2020 report said they trusted family businesses, compared to just 58% who trust public companies—making family businesses the most trusted type of enterprise. (Governments and the media came in last.)

Second, their deeply held values and shared commitment to contributing to society are hard-wired. Taking care of their workforce and communities, for example, have long been part of their DNA, dating back to well before formal ESG commitments became a global trend.  

But the internalization of ESG will make a big difference. And we are beginning to see that particularly in Asia. In our latest family business survey, more than 75% of businesses in China, Japan, and Taiwan said they put sustainability at the core of everything they do, compared to just 23% in the US and 28% in Canada (see chart below). Businesses in Western economies, and especially in North America, prioritized giving back to the community—a shorthand commonly used to describe more traditional philanthropy.