According to recent studies, environmental, societal and governance issues are at the top of the priorities of companies, all sectors of activity combined.
In June 2022, the S&P 500 ESG Index, – which indexes active companies according to their progress in applying environmental, societal and governance (ESG) constraints – has made highly publicized changes to its list. New companies have entered such as Twitter, Modern and Expedia while heavyweights such as Tesla, Home Depot, Chevron and Under Armor have dropped out of this ranking. And that wouldn’t have liked Elon Musk
Beyond Elon Musk’s halt to ESG efforts, attention to the evolution of this list echoes growing financial market and consumer interest in corporate actions regarding ESG. The enthusiasm on this subject is real. However, we have to wonder about the challenges that managers have to face in order to integrate ESG into their strategy!
To answer this question, ServiceNow and ThoughtLab consulted 1,000 leaders worldwide divided into five sectors of activity: industry, telecom, health, financial services as well as the public sector. There is already good news: each sector is making progress towards achieving its ESG objectives. However, there are big differences in the methods and what they need – and lack – to achieve them successfully.
Whatever the sector, all companies are aware of being confronted with enormous pressure. They are aware that they must make progress in terms of ESG, progress that they must also be able to measure. Executives who responded to the survey reported that they were under “medium to high” pressure to implement and enforce ESG criteria in their organization.
Until now, many analysts saw ESG as a public opinion issue. This is absolutely not the case and most of the respondents even indicated the opposite. According to them, it is their employees and their shareholders, and not the general public, who really pressure them to accelerate the integration of ESG criteria.
We also see that most companies deal with this pressure by focusing on the “E” part of ESG: environmental sustainability. These are the reduction of carbon emissions and the renewal of energy sources which are at the heart of the concerns of many leaders. These two points are particularly cited by managers whose companies are still in the early stages of developing their ESG strategy. Leaders who are just beginning to think about ESG place green energy sources as a starting point for their thinking.
Sustainability often appears as one of the key objectives, but the pressure to solve societal problems is also increasing. This is not surprising in the context of the “Great Resignation”. Indeed, more than half of respondents try to build happier teams and fairer working conditions. This can mean funding additional studies for their employees, offering them opportunities for development and training, or being more attentive to their working conditions.
Managers are resourceful
To classify the companies of these leaders on their maturity in terms of ESG, numerous criteria have been defined: Have they developed an ESG vision, strategy and budget; have they communicated this strategy to stakeholders, including their employees and investors; Have they developed metrics to track their progress and used digital technologies to support their ESG efforts ?
Surprisingly, it is the sector ofmanufacturing industry which is ahead of other sectors. The first reason for this high ranking is that it was industry that was first criticized for its negative impact on the climate (with good reason; a large part of the global risk to the environment comes from factories and supply chains). ‘supply). Another factor is that manufacturing companies tend to be large, so they have the resources to make rapid and substantial progress towards ESG objectives.
Over the past 20 years, global industries have become increasingly rigorous in their data collection processes and methods.
Data is paramount in determining a timeline to achieve net zero carbon emissions or to increase diversity and inclusion in the workplace. The more a company can measure its progress, the better it can analyze and understand it to adapt its decisions and strategy afterwards.
The lowest maturity scores come from the telecom sector and, in particular, from the public sector. In the uncomfortable situation of “do as I say, not as I do”, government agencies and other branches of public sectors abound. These entities are often slow and in some cases hampered by inefficient data collection, poorly defined management and reporting standards and constraints. Of all the sectors studied, the public sector is under the most pressure from different communities to make progress on ESG.
Managers are optimistic
Another common point that may surprise executives? their optimism.
Overall, senior executives are convinced that their companies have the tools and means necessary to make concrete progress on ESG. Most companies invest in advanced technologies such as Connected Objects (IoT) and Artificial Intelligence. These new tools allow them to collect data, track progress and automate basic processes. Along with these new investments, many managers in vertical market segments also said they were investing to ensure data privacy.
Senior managers are also aware that they need a skilled workforce to integrate these new tools and implement these technologies. We see here a feedback loop : business leaders need qualified personnel if they want to achieve their ESG objectives, but they also believe that it is crucial to achieve these objectives first to attract the best talent.
They are also right. Many employees report that they prefer to work for companies that act and make a difference on ESG. Given the amount of time and energy companies devote to ESG, this optimism seems legitimate.
We want to give thanks to the writer of this write-up for this amazing material
ESSENTIAL ESG – Forbes France
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