Even though virtually all (98 percent) global business leaders cite environmental, social and governance (ESG) as a top factor in business success, only 25 percent of North American respondents think that prioritizing an ESG strategy will be an ‘extremely important’ focus by 2032, compared to 71 percent of their counterparts in the Asia-Pacific region and 58 percent in Europe, according to new research from global consulting firm Protiviti.
The firm’s new survey, the latest installment of its VISION by Protiviti thought leadership series, explores the business outlook of the future of ESG in 2032 and beyond. The survey was conducted in collaboration with the Global Centre on Healthcare and Urbanization at Kellogg College, University of Oxford.
This ‘enthusiasm gap’ could indicate a majority of North American business leaders are out of step with other leaders globally in establishing and/or achieving ESG goals. Regarding environmental factors specifically, 37 percent of North American executives shared that they believe their corporate greenhouse gas emissions will decline by 2032, whereas Asia Pacific and European leaders were much more optimistic at 88 percent and 81 percent, respectively.
“Every day we see more organizations setting long-term ESG goals, and these goals require clear roadmaps to achieve them. While there continue to be debate and different approaches to ESG, it’s an important topic to many stakeholders. Organizations need to be clear about their goals and objectives for addressing ESG matters,” said Cory Gunderson, executive vice president, Global Solutions at Protiviti, in a news release. “Our research indicates that ESG will remain a focus within business strategies for most industry sectors over the next decade. However, many organizations—especially those in North America—appear to be in more of a ‘wait and see’ mode and may not be on track compared to their global peers.”
In terms of spending on ESG, 64 percent of surveyed leaders globally expect an increase in corporate spending to manage environmental risks ten years from now. However, 61 percent of North American leaders report numbers that share a different reality, with responses indicating that their companies’ spending for environmental concerns will remain the same or even decrease in ten years’ time.
Generational discrepancies also arose with the younger C-suite executives (those under the age of 50) indicating that ESG will become extremely important over the next decade (60 percent). Overall, almost three-quarters of respondents note their company has established a dedicated ESG or sustainability post or office.
Adapting ESG over the next ten years
Over three-fourths of business leaders surveyed (78 percent) believe that ESG reporting will become mandatory within ten years. Fewer than half of North American business leaders (49 percent) believe ESG reporting will become mandatory by 2032. The survey also found that consumer demand (42 percent) and regulatory requirements (39 percent) are expected to be the top two main drivers of change within the ESG space globally in the next 10 years.
“ESG reporting is not an end in and of itself. It’s a useful mechanism to shine light onto what companies are doing and the progress they’re making toward their ESG goals,” said Christopher Wright, global leader of Protiviti’s Business Performance Improvement Solution, in the release. “Continuing to instill reporting and compliance, be it mandatory or voluntary, into ongoing business processes will help companies progress their ESG strategy over the next decade.”
Differences arise in tracking the extreme risks that companies are most worried about now and in the next decade. When assessing the highest amount of risk across the E, S and G currently facing their companies, 43% of business leaders cite the environmental factors, compared to 37 percent for social and 20 percent for governance. When asked what area within the ESG spectrum will pose the most ‘extreme risk’ in the next decade, 21 percent feel environmental factors, whereas 7 percent report they are extremely concerned about governance factors and 12 percent think social risks will be the most extreme risk by 2032.
The ESG survey respondents were 250 board members, C-suite executives and other global business leaders who work for public, private and non-profit organizations representing a wide range of industries. The survey was conducted in June and July 2022.