Whether due to the pandemic, the climate and biodiversity emergency, widespread social inequality or demand for transparent and accountable corporate governance, the global case for a genuinely sustainable model has come of age.
Environmental, social and governance (ESG) performance has been significantly elevated up the corporate agenda. The definition of ESG criteria, and their role in a company’s value and strategy, has grown over the past two decades to become a key and necessary part of a corporate strategic agenda.
Our research shows that some 81% of G20 business leaders agreed that their company has been spending more resources on ESG and sustainability since the COVID-19 outbreak, whilst 1 in 3 said that their organisations are under ‘extreme’ pressure to improve their ESG and sustainability performance over the next 12 months.
of G20 companies see COVID-19 as an opportunity to materially enhance their approach to ESG and sustainability
were the top two issues of increased importance for G20 companies in 2020
With regards to environmental sustainability, international agreements and national policies are transforming national economies. More than 3 in 4 G20 business leaders said that their company has become more committed to combatting climate change over the last 12 months, with the food and beverage and extractives sectors active in bringing about change.
With the arrival of the pandemic, companies’ approach to social responsibility became more focused. 4 in 5 G20 businesses agree that since the COVID-19 outbreak, they have been focusing more on the social pillar. Social equality movements entered the public discourse in 2020 more powerfully than before, bringing unprecedented urgency to the topic of workplace diversity and inclusion. Support for the Black Lives Matter movement empowered employee-led discussions around how to increase workplace diversity.
75% of G20 companies reported an increase in pay gap reporting in 2020, reflecting the growing focus on issues of inequality within businesses as well as in wider society. A greater emphasis has also been placed on staff health and welfare as companies grapple with working life during lockdown.
Leadership will be scrutinised in the aftermath of COVID-19; 85% of respondents expect an investigation into their use of state aid, 82% believe that companies should not solely be run in the interest of shareholders, and 83% believe that senior management should publicly communicate their opinions on social and political topics. The primary focus of corporate executives remains the survival of their businesses, and management quality was the most likely corporate attribute to be deemed both favourable and important by G20 respondents.
With ESG performance intrinsic to stakeholder confidence and financial viability, businesses’ ability to weather future crises will depend heavily on satisfying stakeholder expectations in this area. Sustainability must therefore be viewed as an important element of resilience.
Companies need to look well beyond mere regulatory compliance: they need to anticipate and adjust to shifts in government policy and in shareholder and public attitudes, while remaining profitable. The necessary insights into emerging attitudes can only be gained through ongoing stakeholder engagement and communication.
This communication must be two way, of course. Corporate reporting needs to address sustainability issues fully: the ESG Resilience Compass 2020 found that 88% of institutional investors believed there should be more reporting on the actual impact of businesses’ activities.
Whatever the business’s size, industry or location, sustainability is an important tool in building resilience and protecting value for today and tomorrow.