Environmental, social and corporate governance (ESG) has emerged as a critical topic for companies across the world, a trend that will play a significant role throughout the next decade – although in the short term it is being eclipsed by the Covid-19 pandemic as the most pressing concern for businesses. This finding is the outcome of GlobalData’s ESG Strategy Survey, which was conducted across 1,500 ESG executives, and published in January 2022.
More specifically, the survey reveals that Covid-19 will be the theme that will impact the responders’ businesses the most in the next 12 months, followed by ESG. Other themes highlighted include increased regulation, digital transformation and trade disputes.
Nevertheless, the majority of the executives believe that the pandemic has acted as a catalyst for increased focus and action when it comes to ESG issues. “Covid-19 caused companies to face new social and governance challenges," the GlobalData survey said. "In addition, the forced stop in a wide range of activities may have led many to realise that environmental action was more feasible than previously thought."
What is more, the survey found that there is a broad consensus about the importance of ESG, as 91% of respondents believe that companies should have targets in place to meet ESG goals. In fact, the survey reveals that 69% of respondents plan to change their companies’ policies and/or practices in the next five years to achieve these goals.
While embracing ESG criteria is essential across all industries, there are some sectors that tend to rank higher than others in the metrics that measure ESG importance, goal setting and investment, including packaging, mining, oil and gas, automotive and power. A key reason that these sectors rank higher in the metrics is because they are “among the biggest polluters and are more impacted by actions to slow down climate change”, according to the report.
Investments related to the environmental segment of ESG are expected to increase the most, followed by social and then governance.
Indeed, concerns about climate change explain why the respondents selected the environment not only as the sector that will attract the most investment but also as the most important ESG factor for the sectors in which they are operating.
The survey also reveals that the benefits of environmental action are perceived as external to business operations. More specifically, the ESG executives stated that customer satisfaction, a cleaner environment and improved reputation are the main benefits of an excellent environmental record, rather than employee morale, shareholder satisfaction and revenue growth.
Climate change is considered to be the most important environmental factor for the respondents, according to the survey. Other issues that are seen as important are pollution, natural resources and biodiversity.
When it comes to the social factors, 40% of respondents singled out health and safety as the most important. Diversity and inclusion ranked second, followed by human rights and community impact.
Risk management is the most important governance factor, more than 40% of the respondents said. Other key issues include corporate structure, ethics, and corruption and bribery.
The report said that “inadequate governance practices make it more likely that companies will fail to meet ESG goals, including those that would improve their social and environmental records”. This is essential as the ESG executives reported a lack of focus when it comes to governance, as there is more attention given to the environmental side, followed by the social element.
However, having a holistic approach towards embracing ESG is significant for waterproofing an organisation’s long-term performance and sustainability, so companies should pay equal attention to ticking all the ESG boxes.
To download the full report, please visit https://store.globaldata.com/report/esg-strategy-survey-analysis/