ESG will be the critical theme impacting companies this decade, but Covid-19 is still dominating businesses’ attention in the short term. GlobalData surveyed 1,500 ESG executives from around the world to gauge how companies are setting up and implementing plans to improve their records on environmental, social and governance factors.
The most important themes, ranked
When asked to rank the themes that will impact their companies the most in the next 12 months, respondents to our survey ranked Covid-19 above ESG and put both well ahead of other themes like increased regulation, digital transformation and trade disputes.
Given the impact Covid-19 continued to have on businesses in 2021, it is no surprise that only a minority in all sectors saw ESG as the theme with the most impact.
One reason for optimism is that the sectors where those minorities were larger are industries with a high environmental impact. Packaging, which had a clear lead in this metric, was followed by oil and gas, mining and power. This indicates that there is awareness in these sectors that change will be needed and that environmental policies will impact them more than most.
Other industries with a high environmental impact, like travel and tourism, construction and automotive, rank lower in this metric. In these sectors, leadership teams need to start taking ESG more seriously, though the fact that they were all badly impacted by Covid-19 might explain why ESG is taking a backseat.
Another reason for optimism is that there seems to be little doubt that companies recognize the importance of ESG. Respondents to our survey said that ESG should be central to decision making, including investment decisions. Moreover, an overwhelming majority (91%) thought companies should have targets in place to meet ESG goals. Indeed, our survey shows that most companies have changed their practices, or plan to do so in the next five years, to meet ESG objectives. Most also claimed that they were investing in improving their ESG performance.
COVID-19 as a catalyst
A majority of respondents said that Covid-19 had functioned as a catalyst for ESG issues. Covid-19 forced companies around the world to change the way they operate. Many businesses brought forward digital transformation plans and there was a boom in the adoption of technologies such as Cloud computing and collaboration tools. Covid-19 caused companies to face new social and governance challenges. In addition, the forced stop in a wide range of activities may have led many to realize that environmental action was more feasible than previously thought.
We believe that once Covid-19 recedes or becomes endemic, ESG will be front of mind. However, we are not yet at that point and the quick spread of the Omicron variant might mean that things will not change for a while.