Corporate Sale: ESG Criteria as Value Drivers

In a world where consumers, investors, and regulators are placing ever higher demands on companies’ environmental and social responsibility, sustainability aspects are becoming a central factor for long-term success. But ESG criteria are playing an increasingly important role not only in operational business but also in mergers and acquisitions. This article explores why a positive sustainability record can increase a company’s value and what sellers and buyers should pay attention to.

What Does the Term ESG Mean?

ESG stands for "Environmental, Social, Governance" — referring to environmental, social, and corporate governance factors. These are three key areas used to assess a company’s sustainability and social responsibility. Examples include:

Environmental Protection: Carbon footprint, resource consumption, share of renewable energy, waste management
Social Responsibility: Employee rights, diversity, workplace health and safety, fair compensation
Governance: Transparency, compliance, anti-corruption, responsible leadership

The better a company performs in these areas, the more positive its ESG rating. Increasingly, investors, as well as customers and potential employees, consider these metrics when making decisions.

Sustainability Pays Off: Higher Valuations, Lower Risks

Studies show that companies excelling in ESG are often valued higher on the stock market than their less sustainable competitors. There are several reasons for this:

They are considered more future-proof and resilient to crises because they conserve resources and focus on long-term success.
They face fewer issues with regulators and NGOs because they comply with or even exceed laws and standards.
They are more attractive to young talent, who often prioritize meaningfulness and responsibility over the last bit of salary.
They open up new customer segments and markets that value sustainability and ethical conduct.

All of this also impacts business transactions. Strong ESG performance can significantly increase the sale price, as buyers are willing to pay a premium for future-proof business models. Conversely, companies with sustainability gaps often see lower valuation growth or even sharp declines in times of crisis.

Due Diligence: Objectively Measuring ESG Maturity

It is therefore crucial to integrate ESG factors early in the M&A process. During due diligence, prospective buyers should systematically assess how sustainably and responsibly the target company operates. Specialized ESG service providers can assist by, for example:

Analyzing and benchmarking environmental and social performance
Scrutinizing supply chains and procurement practices
Evaluating leadership and control structures
Reviewing certifications, industry ratings, and media reports

This information reliably determines a company’s ESG maturity level. At the same time, potential weaknesses and risks that could affect value and future viability become apparent.

Actively Shaping Sustainability: Levers for Value Enhancement

For sellers, this means: those who invest early in ESG and make sustainability an integral part of their corporate strategy can expect higher valuations at exit. Three levers are particularly effective:

Transparency & Reporting: Sustainability reports according to recognized standards such as GRI or DNK demonstrate current status and progress.
Innovation & Transformation: Investments in resource-efficient technologies, cradle-to-cradle product design, or low-emission mobility pay off in the long run.
Stakeholder Dialogue: Partnering with employees, suppliers, customers, and communities establishes a positive ecosystem.

These measures not only make a company more sustainable but also more crisis-resistant, competitive, and attractive to investors.

Buyers Also Benefit: ESG Creates Win-Win Situations

Buyers, in turn, can benefit multiple times from a positive ESG profile. They acquire a company that:

Excels with innovative, future-oriented business models,
Has an engaged, purpose-driven workforce and loyal customers,
Is less vulnerable to reputational damage and compliance violations,
Can be more easily integrated into their own sustainability strategies.

Especially in a challenging market environment, the ESG factor can become a decisive advantage — for both the acquired and acquiring company. Both sides win.

Thinking ESG Holistically: The Master Discipline for M&A Professionals

As promising as the opportunities are, the path to greater sustainability is often challenging and requires perseverance, creativity, and conviction. ESG is not an isolated discipline but a cross-sectional task that affects all areas of a company, from production to human resources.

Those who want to master it need holistic concepts and coordinated measures. In a transaction, the added challenge is to merge two ESG cultures at different maturity levels, identify synergies, and leverage them.

This is where M&A specialists are needed who not only skillfully handle valuation models but also think beyond the obvious and keep the interfaces between economics, ecology, and social responsibility in view. They understand sustainability as a value creation lever, an innovation driver, and a key to crisis-resilient, future-oriented business models.

Anyone who brings this expertise on board — as a seller or buyer — is well positioned to make ESG criteria a strategic success factor. This not only optimizes individual deals but also makes the company itself more resilient and valuable in the long term. A win-win situation par excellence.