ESG standards are lacking in many companies
Companies around the world are committed to sustainability and consider the issue vital to their survival. However, there is a lack of uniform standards and methods to measure their efforts and compare them with others.
The consulting firm Egon Zehnder has published a study that examined the presence of ESG issues in companies. This also addressed the question of ESG standards. For this purpose, 329 executives in 53 countries were interviewed. Among other things, the study looked at the environmental, social and governance (ESG) goals that companies and organizations have set themselves and the measures they consider essential for society as a whole. In addition, Egon Zehnder wanted to know what challenges executives face when it comes to sustainability and what roles CEOs, other leaders and leadership teams play in implementing a sustainability agenda. The study was conducted in cooperation with Sustainable Views, a newsletter of the Financial Times.
CEOs rethink their role
Two changes are shaping corporate culture in the process: growing demands for equality in the workplace and the call for more flexible, hybrid forms of work. CEOs around the world are therefore rethinking their role. How do they want to work with their teams in the future? In what ways do they want to develop the company - and themselves? How do they position the company for the long term? In the current complex business environment, it is crucial for CEOs to prioritize their own development while learning to better leverage the potential of their own organization.
C-Level shows responsibility for sustainability agenda
Who is responsible for ESG standards in companies in the first place? Most of the respondents (68 %) say that a single person is responsible for the sustainability agenda in their company. Sixty-six percent of them say it is the CEO, while 9 percent say it is the chief sustainability officer. About 27 percent of respondents said the responsibility is held by the top team: C-suite or board of directors, while 3 percent put the responsibility on everyone in the company. At the executive level, 82 percent believe their boards are well equipped to monitor sustainability threats and opportunities, but there are concerns about readiness, conflicting priorities and lack of sufficient or good enough data to make progress.
On the way to a new corporate culture
Another finding of the study is that to become a more sustainable company, current culture and goal setting may need to change. Indeed, more than half of respondents (56 %) say their companies need to change their collective mindset to achieve their sustainability goals. Recognizing that a shift in thinking is necessary is critical, but the real challenge is embedding sustainability at the core of the organization. For many, this means a big shift away from traditional business models. Some companies are already on this path: a full 37 percent of respondents describe their company's approach to sustainability as "transformative," while the next largest group (27 %) describes it as "innovative."
Topic on the agenda, but uniform ESG standards are lacking
Further, the study authors note that the lack of universal benchmarks is an ongoing challenge for most companies. Not all companies define sustainability in the same terms, and they often use different frameworks and systems to measure progress. But even for companies that have embedded sustainability into their core business, the question of measurable ESG standards to elicit progress remains. Committing to specific ESG goals is a commonly used way of measuring: about 86 percent of companies responding to this survey have committed to ESG goals. Those respondents that have not yet done so indicated that they are in the process of doing so. This high level of commitment is seen as a clear sign that the issue of sustainability is gaining momentum. However, much remains to be done in order to take effective action.
A CSO should no longer be a "nice to have
While most respondents believe the sustainability agenda is in the hands of CEOs, 60 percent believe CSOs are leading it. The study also found that most respondents find it challenging to link sustainability to overall business strategy, and that CSOs are often the missing link for organizations when it comes to linking business and sustainability goals. For them, there are four priority areas to address over the next 12 months: Incentive structures and culture, increased resources for staff and professional development, carbon emissions and internal work awareness, and alignment on the same goals and increased collaboration.
From "commitment in vagueness" to uniform ESG standards
The survey also provides insights from thought leaders across industries on the role of leadership in advancing sustainability, challenges, strategies, success stories and lessons learned. The survey shows that advancing a sustainability agenda is an achievable goal. Ultimately, it's about consistency and persistence, the survey authors said. According to Elena Rittstieg, of Egon Zehnder Switzerland, the study shows that commitment to sustainability requires decisive leadership, a clear vision and a solid strategy embedded in the overall business strategy. It is about delivering on promises made to oneself, the board of directors, investors, employees and stakeholders outside the company. This calls for managers who truly internalize the issue of sustainability.
For those interested, the study can be viewed here: https://www.egonzehnder.com/sustainability-survey
