Typical Uncertainty of Sustainable Growth for an ESG-Applied Enterprise
Abstract
The subject of the study is an enterprise based on ESG principles, which implies its concern for the interests of not only the current but also future generations. The study was undertaken to develop a sustainable growth model that takes into account economic uncertainty and is capable of covering a period of time sufficient for ESG program implementation. Despite the widespread desire to achieve sustainable growth, there is no unanimity in regard to the methods of integrating long-term development programs with traditional commitment to current profit maximization. One of the difficulties is associated with reaching intergenerational planning horizons. In addition to their short-term nature, existing sustainable growth models do not include an indicator of the uncertainty associated with the activities of the enterprise. To solve this problem, the paper uses methods of integrating stochastic differential equations, which allows to move away from the deterministic dependencies of predecessor models. The resulting stochastic trend model takes into account the systematic long-term impact of the environment. This approach turns it into a hyper-long-term planning tool commensurate with the duration of the enterprise life cycle. According to this model, the probability density of revenue growth rate is subject to a logarithmically normal law with numerical characteristics changing under the influence of competition and inflation. The paper envisages several development scenarios characterized by different dynamics of the random component. If the enterprise follows ESG principles, then the typical growth scenario will be the most suitable one. The random component
of growth of a typical enterprise degenerates over time, and its rate is determined by the risk-free interest rate. From the concept of intersecting generations, it follows that typical enterprises contribute to the dynamic efficiency of the economy.
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