Belief in ESG strategies wanes

Yasmine Raso

Senior Journalist, Financial Newswire

17 April 2023

While sustainability and environmental, social and governance (ESG) commitments continue to dominate industry rhetoric, faith in the effectiveness of such strategies implemented by companies has fallen.

According to GlobalData’s ESG Sentiment Polls Q4 2022, only 19 per cent of respondents said they believed most businesses to be fully committed to ESG, while 30 per cent said they see most companies using ESG as a marketing exercise.

This sentiment saw an eight-percentage-point rise from the last poll conducted in the previous quarter. Close to 30 per cent of those polled also said they thought some companies take ESG seriously, but for others it is just a marketing exercise.

“The reluctance of many CEOs to fully engage with ESG can be attributed to the age-old view that it will hurt profits,” Cyrus Mewawalla, Head of Thematic Intelligence at GlobalData, said.

“However, our research suggests the opposite. Companies that embrace all three elements of ESG will outperform their peers. CEOs that are too slow to improve their company’s approach to sustainability will see an exodus of customers and a drop in profits far sooner than they ever imagined.”

Mewawalla warned companies to reconsider their recommitment to ESG goals if the long-term sustainability and profitability of business operations are to be guaranteed.

“The decline in faith in the effectiveness of ESG strategies is a cause for concern,” he said.

“With cybersecurity emerging as a significant threat in 2022, businesses must recognise the importance of ESG and take action to mitigate risks, build resilience, and restore trust. Failure to do so may result in long-term reputational and financial damage.”