Despite growing political opposition and criticism, ESG remains a transformative force in corporate strategy. According to the Ipsos ESG Council, which is comprised of senior sustainability leaders from leading global organizations, ESG is helping transform corporate behavior.
One of the primary reasons why ESG is unlikely to fade is the adoption of new ESG regulations. The Corporate Sustainability Reporting Directive already requires that firms report on the impact of their activities on the society and the environment. Additionally, the development and adoption of ESG regulations is helping to standardize reporting practices, ensuring greater accountability and transparency across industries.
Council members also expect artificial intelligence and other technologies to revolutionize the collection and reporting of ESG data, making sustainability initiatives more actionable and measurable.
Companies will have to get over some hurdles though, like the global politicization of these criteria, particularly in relation to climate action and diversity, equity and inclusion (DEI) initiatives.
This criticism presents a significant challenge to ESG implementation, with over 40% of council members arguing that ESG isn’t a priority for governments and politicians but rather, an issue they continuously debate/use for their own advantage with no intention to resolve it. This division is discouraging more companies from openly communicating their sustainability efforts, breeding uncertainty and, in turn, making long-term planning harder.
To navigate these pressures, companies may benefit from keeping a lower profile when it comes to matters ESG. While this approach may limit reputational growth, it may also reduce the risk of attracting backlash.
Firms like Goldman Sachs, Morgan Stanley and Citigroup have in the last year faced intense scrutiny over their environmental and diversity policies, leading them to exit the Net-Zero Banking Alliance, which is focused on achieving net-zero greenhouse emissions by 2050.
Despite these challenges, companies balancing the interests of their stakeholders and aligning their sustainability initiatives with their core business values will help keep ESG alive.
Council members also believe collaborating with other departments is key to successfully developing and implementing ESG strategy in a company, especially since any objection to a proposed measure by a department can interfere with an entire project. Good governance is also important as it ensures that the prioritized initiatives are relevant to a company’s market or sector and drives execution to the project’s full potential.
It is important to note that a fundamental shift in mindset to recognize ESG as a driver of long-term growth and innovation rather than a compliance practice is needed for this to be successful. Already, some firms, such as Coyuchi Inc., are showing a bigger interest in the long-term benefits of adhering to ESG principles rather than simply ticking some boxes on a checklist. With time, the number of companies taking this approach is likely to grow.
NOTE TO INVESTORS: The latest news and updates relating to Coyuchi Inc. are available in the company’s newsroom at https://ibn.fm/COYU
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