The ESG Paradox: Questioning the Non-Essentials for Growth

What does it mean for a business NOT to integrate ESG aspects in business growth?

According to a 2022 study (updated in June 2024), some 98% of S&P 500 companies issue annual ESG audits  — a number on track with 99% the previous year. Of particular interest to company leaders and stakeholders are the environmental implications of their work; many of these audits prioritize focus on companies' carbon and greenhouse gas emissions, with commitments to social components of ESG sometimes occurring only as an afterthought.

But how accurate are these reports? ESG assessment relies on qualitative and quantitative analysis of ESG metrics — typically those reported annually by companies. These analyses tend to focus on understanding how the company manages risks (e.g., environmental footprints) and opportunities (e.g., positive societal or environmental impact, sometimes referred to as a 'handprint'). Unfortunately, these calculations are often based on a subjective interpretation of the extent of their impact on the company's valuation or financial performance.

Significant ambiguity remains around how a company's ESG framework translates into expected growth. For example: How much does reducing carbon emissions or improving energy efficiency contribute to client or market expansion over the next two years? While investors often argue that strong ESG performance enhances long-term value, they rarely pinpoint where or how this value materializes.

As a result, ESG performance is frequently decoupled from financial growth projections and isolated from core strategic enablers such as product innovation, service differentiation, or market expansion. In practice, ESG is often treated as an add-on or compliance requirement — siloed from the business's value engine, and lacking a clearly defined financial impact.

This disconnect needs to be addressed — especially now, as growing scrutiny or skepticism toward ESG (e.g., concerns about greenwashing, vague metrics, political pushback) highlights the importance of grounding sustainability efforts in clear, strategic, and value-driven terms.

How can we solve this?

Asking the Right Questions

Sasja Beslik, author of Where the Money Tree Grows (2021) and the weekly newsletter ESG on a Sunday, proposes an interesting approach: What if we effectively turn the system "upside down," inverting the typical ESG questions and analysis?

• Given the company's products and services, which ESG issues are not material to achieving its financial and sustainability goals?
• Which internal ESG policy frameworks may have little relevance to delivering those outcomes?
• Which ESG KPIs have a limited connection to financial or growth targets?
• Where is there a disconnect between current ESG activities and sales strategy?
• Which aspects of climate risk accounting are not relevant to the company's specific exposure?

Something surprising happens when companies start answering these inverted questions: they gain sharper insight into the ESG factors that truly drive their business — uncovering embedded ESG value drivers that influence growth, innovation, and resilience.

This approach leads to what we might call "inverted materiality." By identifying what isn't critical to their growth and stakeholders, companies can better define what is — helping them prioritize ESG actions that are strategic, targeted, and value-aligned  - aligning ESG with growth levers, not just compliance.

 

Identifying the Differentiators

Once companies have isolated the core ESG components that make or break their business, they can more readily calculate the true impact of taking—or not taking—certain concrete steps. Take infrastructure as an example: What are the consequences for different business variables, such as sales, maintenance, and regulation, when climate targets (including those related to carbon emissions from new construction) are not considered? It's possible to identify a range of potential outcomes:

• Sales (pricing and competitiveness): While there may be no immediate impact, a company may lose competitiveness over the medium term against peers that actively integrate sustainability. Increasingly, decision-makers are expected to establish climate-aligned targets — which influence how infrastructure is designed and delivered. Environmentally certified or low-carbon assets will likely command pricing premiums and gain preference in procurement.
• Capital expenditure: Skipping ESG-related targets (e.g., emissions) may seem like a cost-saving measure in the short term. Due to advanced technologies and eco-friendly features, sustainable infrastructure would likely have higher upfront construction costs. However, this thinking can be short-sighted: only a whole-life cycle analysis would help quantify and clarify it. In any case, future regulation, funding access, and asset valuation increasingly depend on long-term sustainability (and resilience) performance.
• Maintenance: Sustainable infrastructure tends to reduce operational and maintenance costs over time. This stems from improved energy efficiency, more durable materials, better design integration (e.g., for natural ventilation or rainwater reuse), and on-site renewable systems. Neglecting emissions considerations can mean missing out on these savings.
• Compliance and regulation: Regulatory frameworks are dynamic and subject to increasing scrutiny. Public sentiment and investor pressure are accelerating the push for stricter environmental standards in many regions. Some countries already mandate specific certifications for public or vertical infrastructure. Companies that deprioritize climate targets may face costly delays or risk project ineligibility due to non-compliance.

An Undeniable Upside

While sustainable (and resilient) infrastructure may have higher upfront construction costs due to advanced technologies and eco-friendly features, the long-term savings from reduced maintenance expenses, energy, resource efficiency, and risks can more than mitigate the initial investment. Additionally, sustainable infrastructure contributes to environmental conservation and attracts tenants or buyers who prioritize sustainability, leading to potential financial benefits via increased property value or rental rates.

But how can organizations properly quantify the repercussions of different options, such as associated costs vs. savings, or environmental compliance related to the new infrastructure? Model-based approaches leveraged by infrastructure digital twins can help with these calculations.

Some tangible examples expand on the range of business outcomes affected by (or omitted due to lack of) ESG integration:

Sales: Digital Twin Integration for Sustainability

• Example: Infrastructure owners and contractors using digital twins to estimate or monitor energy usage, embodied carbon, lifecycle emissions, or even quantities and costs can offer greater transparency to clients, regulators, and investors.
• Without ESG: Companies not integrating ESG into digital workflows lose the sales edge in public tenders or corporate partnerships that increasingly demand full asset lifecycle visibility.
• Impact: Missed opportunities in markets with ESG procurement criteria (e.g., EU Green Public Procurement), reduced client trust.

Capital Expenditure: Resilient Infrastructure Design

• Example: Projects designed for climate resilience (e.g., flood defenses, elevated transport networks, heat-resistant materials) may require slightly higher CapEx up front.
• Without ESG: A lack of forward-looking design may expose the infrastructure to climate-related damage, driving up retrofitting or insurance costs.
• Impact: Higher long-term costs due to physical climate risk, and inability to qualify for green finance mechanisms or resilience bonds.

Maintenance: Smart Water Systems and Leakage Detection

• Example: Sustainable urban drainage systems (SuDS), smart metering, and leak detection reduce water, waste and maintenance needs.
• Without ESG: Conventional systems are more resource-intensive, with higher maintenance costs and regulatory risk in water-scarce regions.
• Impact: Missed ESG-linked performance incentives, and reputational risk in markets where water stress is a growing public issue.

Compliance & Regulation: Carbon Reporting in Infrastructure Portfolios

• Example: Governments are increasing pressure on large infrastructure developers and operators to report Scope 3 emissions (e.g., from subcontractors, material sourcing).
• Without ESG: The inability to account for supply chain emissions could result in non-compliance with investor or government disclosure rules (e.g., CSRD in Europe).
• Impact: Project approval delays, financial penalties, exclusion from green financing.

Cross-Cutting: Social License to Operate (SLO)

• Example: Infrastructure that respects ESG criteria (e.g., community engagement, equitable access, minimal environmental disruption) is more likely to gain a social license.
• Without ESG: Projects may face public opposition, legal action, or even cancellation (e.g., road expansions through sensitive habitats or underserved communities).
• Impact: Delays, cost overruns, reputational damage, investor divestment.

The Strategic Case for ESG: Resilience, Relevance, and Return

Organizations need to explore options to improve their products and services meaningfully while taking steps toward a greener future. However, they need to internalize how failing to integrate ESG poses risks to growth.

As Beslik says, "The true integration of ESG is not about what ESG can add to business, products, and services, but what it means for companies not to include ESG so they can grow that business".

In other words, ESG isn't just a layer of compliance — it's a strategic filter that can shape product innovation, risk management, and future market relevance. Companies that align their sustainability efforts with their growth levers today will gain a clear competitive advantage tomorrow.

But unlocking that advantage requires more than intent. It calls for robust analysis of what really matters — and what doesn't. Identifying non-essentials for growth means engaging in scenario planning, whole-life costing, and data-driven impact modeling.

That's where tools like digital twins, AI, and advanced modeling techniques come in — helping businesses quantify ESG-related trade-offs, simulate outcomes, and make smarter decisions in complex systems like infrastructure.

In this sense, ESG isn't a cost. It's a catalyst — for resilience, for relevance, and for return.
 

Rodrigo Fernandes, Director of Sustainability, Bentley Systems
 

Follow Rodrigo on LinkedIn     Follow Bentley Systems on LinkedIn