What is Best in Class?
Best in class is a product that is considered superior to other competitors within the same category or segment. This products offer the highest level of quality and/or utility in comparison to its peers.
Best in class is the highest current performance level in an industry, used as a standard or benchmark to be equaled or exceeded. Also called best of breed.
Best in class is defined as the superior product within a category. It does not necessarily mean best product overall, however. For example, the best in class product in a low-priced category may be inferior to the best product on the market, which could sell for much more.
What Does Best in Class Mean?
Consumer’s associations and critics are constantly reviewing products and services to classify them according to their quality. Their perspectives serve as guidelines for prospective buyers but, ultimately, it is customers who award the status of best in class to a product. A marketing strategy of promoting a product as a best-in-class has its limitations, since customer’s experiences with the item will determine whether that categorization is adequate or not.
In order to achieve this, the product has to be positioned above all other similar choices, not only through marketing, but through actual quality and fitness. A product that has high quality components but fails to meet some of the consumer’s essential needs can’t be regarded as a best-in-class. Nonetheless, a best-in-class product is not necessarily the one with the highest quality in the market as a whole, since this classification is normally given depending on the segment that is being served. The best in class in a low-price category might not be a high-quality product, instead, it is one that provides the highest price-to-value ratio for consumers.
Best-in-class investment means investing in companies that are frontrunners in meeting environmental, social and governance (ESG) criteria in their particular universe, asset class or category.
Examples of the ESG criteria that companies and investors will consider are:
- Environmental: Are renewable energies incorporated within the manufacturing process? Is there prevention from environmental and air pollution? Is the energy used clean and considers climate change? Is waste recycled?
- Social: Does the company play a role in social development? Are human rights incorporated into business goals? Are industrial safety provisions in place?
- Governance: Are corporate management goals transparent? Are shareholder rights protected?
Companies that apply this filter within their investment decisions are assessed on their success in implementing ESG goals in relation to their corporate profits. A score is generated that provides a best-in-class sustainability rating.
Why Best-in-class Investment is a Winner
- Companies that demonstrate effective environmental leadership gain a competitive advantage that will result in continuous strong financial performance.
- Companies that host a track record of minimal environmental damages and penalties compared to their industry peers will benefit from lower environmental overhead costs in the future.
- Best-in-class companies will create matching best-in-class technology, research and new investment positions which will strengthen their company as an investment.
- By showing how their company benefits from sustainable and ethical practices and clean technology, companies that show strong ESG goals can positively influence others.
- Ethical banks such as Triodos only invest in companies that achieve a best-in-class combination of ESG goals, positioning themselves in a securer investment position than their peers.