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Societal expectations and increased regulations such as mandatory reporting will see more businesses forced to set goals.
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Purpose-led businesses believe ESG delivers a competitive edge
27 February 2023
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10 minute read
More than half of global company leaders will implement stronger ESG goals as their companies become more purpose-led in response to investors and customers, according to an HLB Mann Judd survey.
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HLB Mann Judd Adelaide corporate advisory partner Katelyn Adams said firms were looking to meet the greater ESG expectations of stakeholders but also saw a way it could create a competitive advantage.
“They know it is the right thing to do but they also know it can potentially put them ahead of their competitors,” said Ms Adams.
“As an example, one survey respondent told us they want to be more aggressive on progress towards ESG because they believe it will give them a competitive advantage.”
The survey found 37 per cent of respondents were looking to meet wider stakeholder expectations of their ESG goals, and despite the upfront costs Ms Adams said implementing ESG strategies could be advantageous.
“The initial outlay of looking into the ESG piece can be expensive, I think the benefits of having a strong ESG strategy and outlook for a business far outweighs that,” she said.
“If they are looking to attract more funding those key investors really are looking at companies to have a strong ESG piece.”
However, 40 per cent of respondents said they only completed the ESG actions required by regulators while a further 8 per cent admitted their companies did not have any ESG goals at all.
Ms Adams said businesses needed to understand that ESG could assist a firm in achieving increased profitability rather than detract from it.
“Wider commitments to ESG practices, social welfare, and good governance can actually help leaders weather disruption and emerge stronger from it with a more sustainable and profitable business model,” said Ms Adams.
“Many investors are finding companies that have strong ESG practices in place more attractive. A company that can clearly communicate its ESG objectives demonstrates a commitment to acting as a good corporate citizen.”
“Presenting investors with an EGS framework outlines a company’s commitment to continuous monitoring and reporting on those objectives, something investors now expect as standard from companies and their leaders.”
Ms Adams said while greater regulations and mandatory reporting on ESG would be implemented soon, she believed society’s expectations would force many businesses to have an ESG focus.
“It’s more than just regulatory standards that are pushed out of government, it really is key stakeholders who deal with your business day in, day out that really will be calling for you to have a strong ESG position.”
References to ESG had become commonplace and Ms Adams said smaller firms were often overwhelmed by the scope of it. But many would already be achieving ESG goals.
“A strong ESG piece at the end of the day is still a business decision, but I think if you really stripped back to what the values of your business are, most businesses could draw sort of correlations between some of the ESG recommendations, whichever tones they choose, and they’re probably already doing it,” she said.
“It’s not just the E (environmental) and working towards neutral carbon, it’s the other pieces that they can probably flesh out that they’re already doing.”
“Taking a step back and looking at ESG it feels very overwhelming but once you break it down and really align it to the business’s existing strategy, they are already working hand in hand. It’s just understanding it to begin with.”
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