Sustainability has become a crucial concern for both consumers and businesses. However, despite growing interest from consumers and the potential benefits for businesses, the gap between ambition and action remains significant, according to recent research conducted by IBM.
The research, conducted by the IBM Institute for Business Value (IBV), analysed two in-depth surveys. The first canvassed more than 20,000 consumers across 34 countries about their attitudes toward sustainability and social responsibility, and how these beliefs influence shopping, investing, and career decisions.
Second, the institute went directly to business leaders, surveying 2,500 executives across 22 industries, delving into their organisations’ ESG strategy, approach, and operationalisation; what benefits they expect from ESG initiatives; and how they weigh ESG against other business objectives.
According to the report, those with strong ESG credentials exhibited a 43% higher likelihood of outperforming their peers in terms of profitability. However, despite the potential benefits, leaders admit to significant obstacles that need to be addressed. This was underscored by the fact that while a vast majority (95%) of companies have set ESG goals, only a small fraction (10%) have managed to make significant strides in achieving them.
Consumer conscience
Consumer commitment remains steady, with roughly two-thirds saying environmental sustainability (68%) and social responsibility (65%) are ‘very’ or ‘extremely’ important to them.
The study also found that over 70% of respondents would be more likely to apply for a job with a company that prioritises environmental sustainability or social responsibility. Over 40% of respondents said that they would even accept a lower salary to work for an employer that aligns with their values, and nearly a quarter of those who changed jobs within the last 12 months did just that. In general, those willing to accept a lower salary would be willing to take a cut of around 20%.
Despite the fact consumers are showing increasing support for sustainability efforts, the study uncovered a troubling lack of trust in corporate messaging around the issue. In fact, just 20% of respondents reported feeling that they can trust companies’ statements on the topic, a sharp drop from 48% in the previous year.
Top business ESG challenges
When asked about the biggest challenges in advancing ESG programs within their organisations, business leaders identified three main areas:
Poor data
Top-level executives identified poor data management as the biggest obstacle to their ESG efforts. Specifically, they expressed difficulty managing, manipulating, and mapping data related to critical areas such as carbon footprints, labour practices, and compensation policies.
Further investigation revealed that almost three-quarters (73%) cited a large amount of manual data as a problem. Other significant challenges included difficulty in consolidating or manipulating data (70%) and poor transparency in data (70%). Moreover, nearly 69% of executives reported difficulty in mapping data across different brands and geographic locations, further hindering their ESG initiatives.
Too many standards
Respondents also called out the abundance of reporting standards as a significant barrier for progress. The complex and ever-evolving list of ESG disclosure standards, frameworks, and requirements, including the likes of the ISSB, GRI, TFCD, and CSRD, make it challenging for businesses to stay updated and report accurately.
According to the executives, regulatory barriers and inconsistent standards are significant obstacles preventing ESG efforts from advancing. These findings align with those of a previous survey conducted by Deloitte, which emphasised the urgent need for greater standardisation and coordination in the ESG reporting landscape.
A lack of trust
The third blocker centred around scepticism and distrust in ESG disclosures, with growing frustration that ESG goals are not connected to credible action plans and clearer signs of progress.
The study revealed consumers are seeking more, with only one in three feeling they have enough ESG information to make informed decisions about sustainable investing. Similarly, just 41% and 37% of consumers feel they have enough data to make environmentally sustainable purchasing and employment decisions, respectively.
You can find the full study here.
