Has ESG (Environment, Social and Governance) sparked a revolution in corporate behaviour that is delivering better business and creating positive environmental and social impact or has it merely opened the doors to a wave of greenwash, ethics wash and pink wash that is eroding public trust?
This and many other questions will be answered on 19th October at 10am – 11am (CET) when SEC Newgate launches its second global ESG Monitor report.
This 12,000-person consumer research project has been conducted across 12 countries and examines what consumers expect of corporates and governments when it comes to ESG and how well they think that businesses, politicians and public bodies are doing at delivering the promise of a world focused on creating a greener, fairer and more transparent society.
Last year, our inaugural ESG Monitor revealed that the public considered environmental and social impact as a key performance indicator for business and were prepared to be highly activist if they judged that corporates were failing to deliver on their promises.
This year, our ESG Monitor, to be released in the weeks before the UN Climate Chance Conference COP27, will look at how trust in corporates has changed, and what steps business needs to take if it is to deliver against ESG expectations.
Ahead of this key report launch, we asked Fiorenzo Tagliabue, founder and CEO of SEC Newgate what he expects to see coming from this global study and why he believes that continuing to analyse and track the emerging ESG trend is so important for business.
Fiorenzo, why have you decided to focus on this specific topic and why do you think that ESG continues to provoke so much debate within the corporate community?
ESG is one of the key trends of our time. People, especially younger generations, expect business to use its leadership and power to drive change and address core issues like climate change and social inequality.
We see evidence on a daily basis of activist shareholders, investors and asset managers using ESG as a lever to drive change in corporates. We also see the damage that poor ESG performance has on corporate reputation and trust.
These trends continue and tracking how ESG is evolving and how public trust in governments and corporates is responding is important for business as it lies at the heart of any good corporate and communications strategy.
This year we have expanded the scale of the ESG Monitor research and we have surveyed more than 12,000 people in 12 countries – Australia, Colombia, France, Germany, Hong Kong SAR, Italy, Poland, Singapore, Sweden, United Arab Emirates, United Kingdom and the United States.
Since you launched the last ESG Monitor we have seen the war in Ukraine, significant changes in the world economy, a global energy crisis and cost of living concerns, do you expect that the 2022 ESG Monitor report will see a change in public views on ESG?
As with last year, we found considerable commonality of opinion across very different societies. The ESG Monitor 2022 demonstrates again that ESG values, priorities and actions for corporates and governments matter deeply.
Despite the economic and geopolitical shocks of the last 12 months, globally, people still expect to see action on ESG issues, with overall concern about ESG performance holding steady. This suggests ESG is a durable ongoing community priority that is here to stay.
While the cost-of-living crisis has focused public thinking in 2022, as opposed to COVID-19 which dominated in 2021, the trend that we are seeing emerging from the research is that people see ESG and the issues that surround it through a different and more personal viewfinder.
Where last year the banking sector represented the hard edge of ESG-issue awareness, this year there is a closer public scrutiny of organisations that deliver life’s ‘bread-and-butter’ needs, like supermarkets and energy companies – with consumers expecting them to ‘walk the talk’ on ESG issues.
Both cost of living concerns and perceptions of corporate reputation influenced how people prioritised the companies they chose to do business with. While price and service quality were the top considerations in choosing banks, energy providers and grocery stores, their corporate reputation was a top 5 factor. Perceptions of these companies’ ethics and cultural values was also a major concern for the public.
The 2021 ESG Monitor showed that people were willing to be activist and boycott business if they felt that the company wasn’t delivering what it promised on ESG, do you think that levels of consumer engagement is still high (given that consumers have many other concerns on their minds at the moment)?
Yes, absolutely. ESG is still a major communications challenge and reputational issue for business. Globally we see around 72% of those surveyed saying that companies should communicate their ESG efforts more clearly yet the public rate how informed they feel as 4.7 out of 10.
Trust and transparency remain big issues, with the community cynical about how honest companies and governments are about their record and most wanting more public sources of information about ESG performance to help guide consumer choice.
There is however a disconnect, with people seeing their own ESG behaviour in day to day purchasing decisions as less important than the ESG behaviour of companies. And while they think there should be more information available about ESG performance, far fewer have ever actively researched the issue.
People are prepared to punish bad corporate behaviour on ESG, with a high proportion again reporting that they have used or avoided a product or service in response to an ESG issue they cared about.
However, people are surprisingly prepared to forgive organisations that admit their mistakes and commit to doing better with a high proportion saying they will give a company a second chance in these circumstances.
ESG has faced criticism and intense debate in 2022, with some commentators suggesting that in the face of economic slowdown, war and a global energy crisis, that fossil fuels, defense stocks and some SIN stocks should be accessible to ESG investors, do you get the impression that consumers back this debate?
While we can’t reveal the full findings from the ESG Monitor before its launch date on 19th October, I can say that environmental performance remains the single biggest driver of perceptions about companies’ ESG performance globally.
However, the level of community interest in how social issues were addressed through ESG was actually stronger than concern about the environmental performance of corporates this reversing the result from the 2021 ESG Monitor. This includes social measures such as caring for the vulnerable in hard economic times.
Expectations that companies should get on with ESG action, regardless of the economic landscape, were high: people want corporates to behave like a good citizen, to be profitable while also performing well on ESG and to make a start on ESG action, no matter how small.
We found some significant differences in what people expect from small and large companies. In short, large companies need to be seen to ‘do the right thing’ and be ethical in all aspects of their behaviour, as people consider large companies have a genuine ability to impact the world. Meanwhile, small companies have more latitude to show their bona fides through support for community and symbolic causes.
What is common across all categories of business is that consumers expect them to deliver positive impact, to do what they say, to be good employers and to pay their taxes.
Thank you Fiorenzo. The 2022 SEC Newgate ESG Monitor will be launched at 10am (CET) on 19th October 2022.