ESG complexity creating divisions between leadership and staff

There are growing divisions amongst staff in major businesses across the global over the need for greater focus on the risks which they face from the growing regulatory burdens around Environmental Social Governance (ESG).

According to the 2023 Global ESG Practitioner Survey, commissioned by Workiva 71% of ESG practitioners say three or more internal teams contribute to ESG reporting within their organisations. Additionally 74% say their companies have appointed at least one employee to oversee ESG reporting and initiatives, up 6% over the previous year, and the same percentage expect their organisations will be required to comply with two or more global regulations.

However, the survey uncovered a disparity in perceptions across seniority levels. While 62% of c-level executives strongly agree that their companies apply the same level of diligence to ESG reporting as they do to financial reporting, only 32% of managers and senior managers share the same sentiment. Likewise, 87% of executives say their organisations have appointed someone to an ESG-specific role, compared to just 68% of managers who say the same.

Workiva explained the results suggest a significant disconnect between senior leadership and staff and could mean businesses are not fully prepared to comply with emerging regulation, supporting the results of an earlier survey commissioned by Workiva and PwC.

“It’s no secret ESG is receiving heightened attention in boardrooms. What struck me from the survey results is the dichotomy between practitioners of all levels agreeing they find value in ESG reporting while managers in the trenches saying it’s not being treated with the discipline it requires,” said Alex Edmans, professor of Finance at London Business School, part of the team which developed the survey. “Incremental change is not enough. It’s time leaders prioritise ESG reporting as a core business issue, not just a matter for ESG teams. Rather than passively responding to regulation, companies should get ahead of their peers and actively embrace ESG as an opportunity to improve long-term financial performance.”

The survey added despite the disconnect, ESG practitioners overwhelmingly agree that there is value to be found in ESG reporting, with 90% of survey respondents stating that in the next two years having a strong ESG reporting programme will give their organisations a competitive advantage.

The company said the results may indicate the longer a company has been reporting on ESG, the more likely they are to have realised a return on their ESG initiatives. Respondents from organisations that have been reporting on ESG for five years or longer are more likely to say ESG has generated cost savings and improved brand awareness and/or reputation for their companies, compared to those that have been reporting on ESG issues for two years or less.

The survey found there is a growing belief among practitioners that technology is a key component of ESG reporting. Nearly all survey respondents (95%) agree having adequate technology is critical to successfully managing the ESG reporting process, a 19% increase over last year’s survey, and 97% agree that access to technology and data will play an essential role in making decisions to advance their ESG strategy.

“The survey reinforces what customers share with us every day at Workiva,” said Paul Volpe, senior vice president of growth and head of ESG Solutions at Workiva. “Though investors and regulation remain top of mind, practitioners know there is more to ESG reporting than responding to external demand. Done well, ESG reporting unveils opportunity and empowers executives with a vision for the future that sets them apart from their competitors.”