Tipping point for ESG as public demand corporates deliver on their promises.

How are businesses expected to behave and what makes a ‘good business’ in a world where people increasingly expect corporates to reflect their own values? That, and many other questions were what we examined yesterday morning during the launch of the third annual SEC Newgate ESG Monitor.

This landmark global study spans 12 countries and surveys more than 12,000 people to understand community awareness and perceptions around Environmental, Social and Governance (ESG) issues and actions by corporates in this space.

Among the key findings for the 2023 ESG Monitor is that public expectations for authentic action on environmental and social (ESG) issues remains high in the face of cost-of-living pressures, and that inaction by companies — combined with silence about their efforts — could cost them customers.

The research indicates that we may have reached a tipping point, suggesting that the need for genuine action by corporates to address the impacts they are having on people and the planet is no longer up for debate.

Some of the main findings included:

• 67% rated their interest in ESG issues at 7 or more out of 10, up from 56% in 2022;
• 77% agree it is important for companies to take action on ESG issues;
• 71% agree that companies should speak out on issues that are important to their employees and customers.
   

Speaking on the findings, Fiorenzo Tagliabue, Group CEO of SEC Newgate, said: “We know some companies are staying quiet about their actions because they’re worried about being accused of being 'woke’.

“The clear trend that we see through the first two ESG Monitor reports that we ran, and which is confirmed in the 2023 ESG Monitor, is that people care deeply about ESG and they expect corporates to show leadership in delivering positive environmental and social outcomes from their operations.

“The public wants action and wants companies to talk about what they’re doing. They think being a chief executive means acting like a leader and shying away from having an opinion on issues that are important to their customers and employees is no longer an option.”

That view was reinforced by a panel of leading experts who came together for a virtual global discussion on the ESG Monitor findings and the lessons that can be drawn from it.

The panel, compered by SEC Newgate UK Director, Naomi Kerbel, also featured Gillian Tett (Columnist and Editorial Board Member at the Financial Times),  Ilaria D’Aquila (People & Culture Director, Manpower Group), Geraldine Ang (Team Lead, Financial System for Biodiversity and Transition Minerals, OECD Environment Directorate), Patrick Sochnikoff (Group SVP Corporate and Social Responsibility and Chief DE&I Officer, Sodexo Group), Sue Vercoe (Partner & Managing Director, Research, SEC Newgate Australia) and Andrew Adie (Head of Green & Good and Corporate Reputation, SEC Newgate UK).

The group agreed that corporates needed to see environmental and social impact as a core part of their business duty, not as an optional extra.

The panel agreed that companies have to be aware of the moral context within which they work. Gillian Tett described this as moving from a world of tunnel vision (corporates focusing on the balance sheet and financial performance) to a world of lateral vision (beyond the balance sheet to reflect their wider moral, environmental and social responsibility).

Other panellists also spoke of the need for corporates to embrace social and environmental impact not just because it’s the right thing to do but also because its critical to attracting and retaining talent and meeting the expectations that people, particularly younger generations, have on corporates and the way they behave.

Speakers also commented that sustainability is the business strategy today and has to lie at the heart of corporate planning. Not just because mitigating climate change is a key part of corporate risk planning, but also because being sustainable offers significant commercial opportunity for corporates to invest into and develop the low-carbon infrastructure and products that will form the backbone of the world in the coming years.

That impact and the changes in expectations of corporate behaviour was also reflected in the ESG Monitor survey findings. The research shows that community opinions on ESG issues are translating into action and impacting behaviours – particularly who people vote for, the types of food they’ll eat and products they’ll buy.

Here we see some stark differences by generation, with Millennials far more likely to factor ESG issues into their decisions.

For example, when it comes to the type of investments they make, 57% of Millennials rate ESG issues 7 or more out 10 on importance, compared to 47% of Baby Boomers. When considering a job with a new employer, 58% of Millennials give a ESG issues a 7+ importance rating compared to 39% of Baby Boomers.

In a note of optimism, the survey results show the community are seeing corporates in most industries and countries respond and take action.

However, there remains scepticism over whether companies are fully on board with tackling ESG issues, with respondents calling out businesses for poor environmental management, including the use of too much plastic, worker exploitation, prioritising excessive profit over the wellbeing of customers or the community, and a slow transition to sustainability.

They want to see companies genuinely trying, even if they don’t get it perfect the first time, and to think about how they can multiply their impact by working with other organisations and empowering members of the community. They want companies to address these issues in the way they operate rather than charge extra for them:

• 69% agreed that companies can be profitable while also performing well on ESG and;
• 64% agreed that companies should not pass on the cost for better ESG performance to their customers.
   

The research also revealed that nearly 7 in 10 consumers across the globe (68%) agree that companies should communicate the results of their ESG efforts more clearly for consumers and investors, and similar numbers (69%) are keen for this information to be reported in a consistent way, presumably to make it easy for them to absorb as possible.

Despite their strong interest in ESG issues, very few (6%) say they often look for information or do research on a company’s ESG activities or performance and 89% say they either don’t trust, or are unsure whether they trust, what companies claim about their ESG activities or performance.

Sue Vercoe, Managing Director of SEC Newgate Research and Partner at SEC Newgate Australia, said: “It’s clear that an effective ESG strategy is fundamental to reputation these days. Consumers expect authentic corporate citizenship and financial pressure around cost-of-living is not denting those expectations.

“The first thing corporates need to do is look closely at their impacts on people and the planet. When it come to communications they need to narrow their focus to the ESG actions that matter most to customers.

“They also need to choose issues where they have credibility to speak.  People are living busy lives and it can be a challenge to get cut-through and to be believed. Our research shows there is a path forward.”

The public also believes governments must do more to introduce and enforce better regulations around environmental marketing (70% agreed), which will help ensure a level playing field.

You can get a copy of the 2023 ESG Monitor research findings here. If you’d like to discuss environmental and social impact and ESG or explore any of the findings you can contact our Green & Good team in the UK.

Thanks to all our panellists and our research and content teams for their hard work on the 2023 ESG Monitor and we’ll be repeating the survey again in 2024.