ESG Spending Led To Moderate Or Significant Financial Returns, Say 90% Executives
Latest report revealed that nearly 90 per cent of executives say their ESG spending led to moderate or significant financial returns.
The report found that most respondents (66 per cent) experienced ESG returns within three years. But despite ESG’s clear link to profit growth, budgets are likely to be an obstacle in the current economy.
“This is worrisome, as companies need more financial resources and operating model changes to achieve ESG goals and sustain profit growth,” the Infosys report noted.
The report found that a 10-percentage point increase in ESG spending correlates with a 1 percentage point increase in profit growth. A company that currently spends 5 per cent of its budget on ESG can expect a one percentage point profit increase if it aligns operating or capital budget to increase ESG spending portion to 15 per cent.
Companies perform better financially when they demonstrate all the following: a chief diversity officer (CDO), chief sustainability officer (CSO), ESG committee on the board, and also when the CSO clears capital expenditures for ESG initiatives. However, only about a quarter (27 per cent) of those surveyed say their company has all four components in place. The survey data analysis also found that the C-suite and top executive ranks were the most neglected areas for ESG changes. Only 19 per cent of respondents say their company ties executive compensation to ESG goals, and just 30 per cent say their firms place responsibility for ESG with the C-suite.
Research also found that almost all companies are interested in aligning their ESG goals with their supply chain, especially as more companies are expected to account for their scope 3 greenhouse gas emissions. However, less than one-third share ESG expectations or requirements for suppliers. Only 16 per cent say they renegotiate contracts based on ESG data from those in the supply chain — indicating a clear need for more leadership in the supply chain and incentives to share ESG data, whether it’s meeting new contract requirements or making themselves more appealing to others in the supply chain.
