ESG has been under intense scrutiny in the 12 months since SEC Newgate’s ESG Monitor 2023 was published.
This is the ‘Year of Democracy’ during which more than half the global population will have gone to the polls. In many countries environmental policies, economic and social support and the role of business, politics and public in shaping a fair and just society have been at the forefront of debate.
On the back of global economic weakness and cost of living pressures, the investment needed and costs associated with a transition to net zero have sparked heated debate on all sides of the political spectrum.
Yet, the clear trend from the three years that SEC Newgate has run its global ESG Monitor is that the public expect both business and government to set a clear agenda for delivering greater positive impact on ESG issues.
There has also been a consistent trend for the public not to trust the ESG claims being made by business.
Ahead of the launch of the 2024 ESG Monitor, we asked SEC Newgate Group CEO, Fiorenzo Tagliabue, for his views on how the world of ESG is changing.
This is the fourth year you have undertaken the ESG Monitor research, what value does this research bring to the business and its clients and what do you aim to achieve through this study?
The past year has not only been the ‘Year of Democracy’ it has also been the hottest on record with global temperatures spiking as the impact of climate change becomes more apparent.
Business has a critical role to play in helping to lead the transition to a low carbon economy and in driving innovation in new green products and services. Business also has significant impact on people, through its ability to create jobs and facilitate social mobility and create a more equitable and fair society.
Failure to show leadership and deliver positive change for planet, people and place brings enormous reputational risk as all stakeholders that surround business expect that it will drive change, and many blame business for failing to act earlier and with greater speed and urgency.
Tracking how the public’s attitudes to business and government is evolving when it comes to ESG issues is key to developing and delivering effective corporate strategy and positioning brands to weather reputational scrutiny and embrace opportunity.
This is why we continue to invest in developing the annual ESG Monitor and why we share the insights openly as a tool for business to understand changing public perceptions and use these insights to build better communications and advocacy strategies.
Do you expect to see changes in public and political mood reflected in the 2024 ESG Monitor findings?
ESG and the politics of the green transition have been key issues in many elections and have seen significant differences in approach from the political left and right.
Across Europe we have seen a rise in populism and an attempt to place blame for cost of living rises on the cost of green policies and infrastructure. There is also growing scrutiny of ESG by some investor groups and politicians aligned to the ‘Woke Capitalism’ movement who regard ESG as a constraint on free market investing.
That split is particularly evident in the USA, where the Presidential election takes place in November but it is a trend we see globally.
While public views on the ranking of the issues that matter to them does change from year-to-year, we see environmental and social issues continuing to score highly as issues that the public care about and want to see action on. That seems unlikely to change this year from the initial findings that we have seen.
Corporates are increasingly at risk of accusations of green wash, green hush and being called out by activists who disagree with their stance and progress on the ESG transition, is there a trend for business to retreat from ESG?
Business is under intense scrutiny on ESG issues but failing to act ambitiously and failing to be transparent about your plans and achievements on ESG issues poses a significant reputational risk.
While ESG reporting is increasingly covered by clear regulatory and policy mandates, corporates should see this as a baseline activity. Business needs to focus on what it can do to drive more tangible change in the key areas in which it can have a real impact.
Those areas should be authentic for the business, its operational impact and its wider mission. Change has to start within the business itself, through driving higher DE&I standards, reducing scope 1-3 carbon emissions, through developing proactive initiatives that benefit communities and the environment within which that business operates.
Once business has a clear plan and objectives for its immediate impact, and is delivering and reporting against those goals, then it can start to think more widely about how it works with other businesses, politicians and civic society to tackle wider issues in areas where it can lead and deliver change. This goes beyond ESG but underpins what is expected today of a ‘good’ business.
What advice do you give to business looking to up its ambition on ESG issues?
The key advice that we give businesses is that compliance with ESG reporting standards is just a starting point, it ensures business meets its regulatory requirements but it does not signify excellence or an ambitious plan to drive impact through corporate operations.
Business needs to have a clear strategy and plan for how it achieves that higher goal; how it makes the world around it a better place through its leadership and the projects it champions.
Business should choose a few projects to focus on and set ambitious goals and timelines for delivery. It also needs to hold its head high, own the strategy, convene supporters around its goals and go and tell its story and power the change it wants to see happen.
When business does that it is hugely culturally-positive for the organisation and sets it apart from other businesses. It also puts into practice the central ethos behind ESG which is to prioritise responsible business and financial performance as equal strategic imperatives.
Thank you Fiorenzo.
The ESG Monitor will be published on the 16th October 2024, with the report and findings available on the SEC Newgate ESG Monitor website. To join the event please sign up here.