ESG rising up the agenda as public demands greater clarity

Business leaders have been warned that public expectations for authentic and urgent action on environmental and social (ESG) issues remains high in the face of cost-of-living pressures.

It comes as new research found that in the UK more people understand the term greenwashing than they do the term ESG, and firms are shying away from publicising their ESG efforts for fear of being branded woke.

The survey and report spanning 12 countries highlights how inaction, combined with silence about their efforts, could cost businesses their customers.

The third annual ESG Monitor from SEC Newgate found that there has been a sharp increase in community interest in ESG issues, despite widespread concern about cost-of-living pressures.

Although ESG, as a term, appears to lack meaning for the UK general public, expectations for corporate action on ESG have reached a tipping point, suggesting that the need for action is no longer up for debate. Indeed, almost three quarters (70%) of people think it is important for companies to take action on ESG, whilst 63% think that companies should speak out on issues that are important to their employees and customers.

That said, authenticity is important for Britons with 60% not believing companies who say their overall purpose is more important than making a profit.

Speaking on the findings, Fiorenzo Tagliabue, Group CEO of SEC Newgate, said: “We know some companies are staying quiet about their actions because they’re worried about being accused of being ‘woke’.

“The clear thread that runs through our ESG Monitor in 2021 and 2022, and which is confirmed in the 2023 report, is that people care deeply about ESG and they expect corporates to show leadership in delivering positive environmental and social outcomes.

“The public wants action and wants companies to talk about what they’re doing. They think being a chief executive means acting like a leader.  Shying away from taking a position on issues that are important to their customers and employees is no longer an option.”

The survey found in the UK, only a quarter (26%) of respondents feel that the country is, overall, ‘on the right track’, with three quarters (74%) stating that they think the country is heading in the wrong direction. This is the lowest of any of the countries surveyed in the ESG Monitor, with the UK significantly more pessimistic than European and international counterparts. With the UK experiencing a cost-of-living crisis, intergenerational housing inequality, a declining NHS and dwindling confidence in the political system, it is perhaps unsurprising that only a quarter feel that the country is heading in the right direction – almost half the level of confidence shown globally.

Despite high expectations on companies to undertake action on ESG issues and initiatives only a third (31%) believe that companies in the UK are using their power and influence for positive change.

Just over a fifth of people (23%) feel that large companies are performing well when it comes to acting responsibly on ESG. Considering the importance the community places on companies taking action on ESG, there is a clear imperative to act decisively and communicate this clearly to the community, to address this wide perceptions gap.

“This sets the scene for stronger interest in companies’ ESG actions and demands from the public that they should use their power and influence for good,” the survey explained. “In the current ‘polycrisis’ environment, those issues that can alleviate personal hardship feel more urgent than ESG issues, however a rising number (now 15%) class ‘acting decisively on climate change’ as one of their top three priorities for the UK’s future. Interest and awareness in ESG issues is rapidly gaining momentum in the UK, with almost half of people asked stating an interest, a significant improvement from last year’s ESG Monitor results (up by 9% in one year to 49%).”

However, the claims from companies about their ESG actions are also met with distrust and scepticism. Some 60% don’t believe companies who say their overall purpose is more important than making a profit. Almost half (49%) don’t trust what companies claim about their ESG activities or performance, a significant increase of 6% since 2022.

The issue of trust is further exposed by the salience of ‘greenwashing’– a term that has captured the imagination of the UK public – who connect more with this newer term than ‘ESG’. In the 2023 edition of the ESG monitor, 54% of respondents said they had heard of ‘greenwashing’ compared to 43% heard of ESG.  58% of respondents rated ‘greenwashing’ as a big problem in the UK.

Seven in ten people (68%) suggest that there should be a consistent approach for companies to report their ESG performance. 67% also agree that the government should be playing a bigger role to ensure there are better regulations for environmental marketing claims and that these should be enforced. It’s not just important but it is critical that companies communicate better in order to break down the trust barriers – 65% calling on companies to communicate more clearly for consumers and investors.