The United Nations established Corporate Social Responsibility (CSR) as a management concept in the late 20th century. CSR involves integrating social and environmental concerns into companies’ operations and interactions with stakeholders. CSR later gave rise to ESG. It is predicted that ESG assets under management could reach over a third of the projected $140.5 trillion global total by 2025.
It’s no surprise that last year’s hot topic was ESG. Consequently, our 15th CEO Survey analyzes how companies in various industries understand and apply ESG frameworks. With the challenges and issues of modern life and business, sustainability has become a top priority since it impacts the environment, economy, and society.
ESG represents a set of non-financial factors that socially responsible investors measure when investing in companies. These factors assess how a company’s business practices impact the environment. Interestingly, these factors are an essential part of an investor’s risk and opportunity analysis when deciding which company to invest in.
ESG comprises three key dimensions:
Each of these dimensions is critical, and it is the responsibility of Board members and CEOs to prioritize corporate social responsibility and ESG. Effective governance is of particular interest to investors and stakeholders as it provides a strong foundation for addressing environmental and social concerns. Our survey indicates that companies in both regional and global markets are making a genuine effort to contribute to all ESG factors, making it clear that ESG is an essential component of achieving long-term success. This is the reality we now face.
The survey included participants from various sectors. The Industrial Sector had the highest percentage of respondents at 20%. The Life Sciences and Healthcare and Financial Services Sectors had 15% each. The Consumer Products and Services, Technology, Supply Chain, Logistics and Transportation, and Government, Education, and Non-Profit Sectors all had 10% of respondents. The Professional Services and Natural Resources and Energy sectors had 5% each.
Out of all the respondents, 80% of them have held managerial positions for more than five years, while 45% of them have been in managerial positions for over 10 years.
Most of our survey participants are from companies that incorporate ESG practices to some extent. The highest proportion, up to 40%, have a dedicated department or sector that focuses on sustainable development. In some companies, each department handles ESG issues on its own, while in others, there is a designated department that oversees them. Only a small percentage of companies do not currently apply ESG principles, but they have plans to implement them in the future.
Half of the companies represented by our respondents have a staff member who is responsible for ESG matters, whereas 45% lack such a person, and 5% have a distinct department or sector dedicated to this area.
ESG is a three-dimensional concept that encompasses 3 areas: environmental protection, social responsibility, and conscientious corporate governance. According to most our respondents, the companies they deal with place equal importance on all three areas.
Companies involved in this study recognize the significance of conducting business sustainably. They have taken various measures to enhance and tailor their operations to preserve the environment. More than 80% of the participants we surveyed confirmed that they actively contribute to sustainable development through energy efficiency, waste management, and recycling. Half of the respondents emphasized the work they are doing to reduce fossil fuel usage and promote the responsible consumption of water.
ESG encompasses various aspects of business and presents certain challenges. One-third of our survey participants indicated that they face the greatest difficulties in managing relations with the local community, as well as ensuring data protection and privacy. On the other hand, the least challenging area is diversity and gender equality.
A transparent work and management system are crucial elements for a company’s success. Eighty percent of respondents report their companies achieve transparency through regular internal audits. Furthermore, many of the respondents report that their companies have implemented reporting mechanisms for any irregularities that may arise, respect the rights of shareholders, and actively combat bribery and corruption.
Corporate social responsibility reporting is a crucial aspect of the ESG framework. To comply with ESG standards, companies must disclose their practices and objectives via ESG reports. According to our survey, 40% of respondents indicated that ESG reports were included in the annual report, while 25% of respondents stated that their companies prepared ESG reports separately. However, 35% of respondents’ companies have yet to produce ESG reports, although they plan to do so in the future.
Change and transformation begin with individuals and their understanding of the significance of running a business that achieves sustainable development. Most our survey participants undertake various initiatives to increase their employees’ awareness of ESG’s importance. This includes organizing internal training sessions and workshops, participating in socially beneficial activities, and implementing internal policies.
The topic of social media privacy is intriguing. We surveyed individuals to determine if they review the profiles of job candidates and employees on social networks. The results showed that 60% of respondents solely review business profiles, and they do not review personal social media profiles.
ESG encompasses not only environmental factors but also governance and social considerations. Cultivating a respectful attitude towards individuals is a crucial component of fostering a positive organizational culture. Based on the responses to the prior question, it appears that there is no inclination to scrutinize the social media profiles of current or prospective employees. The majority of our respondents are unsure whether this practice aligns with the principles of ESG, which raises yet another issue worth contemplating.
As a company embarks on implementing an ESG strategy and making the necessary adjustments to its processes, it may encounter certain challenges. According to our survey, 80% of respondents believe that the greatest challenge lies in truly embodying the values that underlie ESG. Additionally, it is crucial to communicate the significance of this concept to employees and ensure that new procedures align with existing internal regulations.
To implement and develop an ESG strategy in the coming years, there are certain abilities and skills that are essential. These skills are also crucial for experts in this field. They include strategic and systemic thinking, effective communication, cooperation, and the ability to identify and formulate problems. By identifying these necessary competencies, companies can determine the management positions that will be best equipped to guide the implementation of ESG strategy and lead employees in this direction.
Socially responsible companies that prioritize sustainable development and ESG report experiencing multiple benefits like improved environmental protection, pollution prevention, and happier employees who are treated more equitably and fairly. Moreover, adopting an ESG strategy also leads to improved financial performance. Most of our survey participants, more than two-thirds, believe that this approach is the most effective in reducing business risks and operational costs, while also preventing potential damage.
Businesses are making strides towards achieving ESG success and are paving the way for a better future through their commitment to ESG principles. Nonetheless, to truly shift business paradigms and become a more sustainable entity, it is essential for companies to fully implement ESG at all levels. Nevertheless, progress is being made, and companies that have not yet fully adopted ESG practices will gradually incorporate them into their operations and mindset.
Analyzing a company’s success requires performance measurement and evaluation. More than half of the respondents reported that their executives’ key performance indicators (KPIs) include ESG. While this is not yet the case for one-third of the companies, they plan to introduce it in the future.
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