ESG is becoming more and more compliance-driven. ESG consultancy Empact draws this conclusion based on research among nearly 100 mid-sized and large companies from Germany and the Netherlands. The research also shows an increasingly strong integration of ESG within the companies’ strategies, but that implementation is lagging behind. ESG is not yet a way to create value for companies.
The next step is to move from compliance to a strategic ESG execution. According to lead researcher Teresa Brose: “We see that due to new and future legislation such as the CSRD and the CSDDD, there is a lot of attention for ESG compliance. The coming years will therefore be dominated by compliance implementation at companies. We expect that businesses executing ESG strategically will become the best-performing companies in the future. At the same time, we see that this is precisely where the challenge for businesses lies.”
In combination with compliance-driven ESG risk management systems, companies that deal strategically with ESG will also translate this into fairer and more sustainable products and business models. Only then can companies convert their ESG risks into market opportunities.
These are five main findings from the research:
- The focus of companies is on getting ESG compliant;
- Supply chain is the weakest link in the companies’ overall ESG performance;
- The perceived pressure from internal and external stakeholders to design ESG-focused products and business models is already high, as is the awareness at companies for this;
- However, companies should be careful not to fall into the trap of (unintentional) greenwashing, as the research shows that companies use ESG as a selling point, but their performance often does not match their marketing message.
- The research also shows that measuring ESG quantitatively is still a major challenge.
Download the full report here.