94% of CFOs and executives are feeling social and political pressure to prioritise ESG, as leadership continues to face goals for 2023, according to a new study.
The report, conducted by CFO magazine, surveyed 500 SMEs to understand how finance leaders, their teams, and their executive peers interpret and are responding to Q2’s economic trends.
It found as CFOs and their executive teams strive to achieve their Q2 goals and anticipate challenges in Q3, the growing pressures in environmental, social, and corporate governance (ESG) may be diverting productivity away from their organisations’ limited resources.
The corporate equality index (CEI), an independent rating system unrelated to revenue and brand recognition, aims to facilitate discussions on workplace diversity, equity, and inclusion (DEI). Its emergence reflects the ongoing expansion and complexity of ESG and its various components.
Many of these areas have their own leaders, including some in executive positions, who seek swift changes to both internal and external operations. These changes, as indicated by data, are placing additional pressure on many leaders who are already stretched thin.
According to CFO’s Q2 outlook report for 2023, not only CFOs but all executives feel the impact of ESG compliance. Almost all (94%) of the surveyed executives strongly or somewhat agree that they face external pressure to prioritise ESG initiatives in their companies.
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Research and preparation for ESG
Considering the social and political backlash experienced by companies that heavily embrace ESG-inspired endeavours, the report suggests that CFOs remain mindful of their companies’ priorities. While some may aim to attract investors with high CEI scores, others may focus on building brand recognition and ensuring customer satisfaction.
Leaders who desire to maintain high and sustainable levels of sales and positive customer perceptions should carefully consider their ESG approach, with a customer-centric mindset. Understanding the organisation’s target audience and customer base is crucial. Few companies can afford the severe repercussions faced by those criticised for taking their initiatives to extremes, resulting in billion-dollar backlashes, such as that of Bud Light and more recently, US-based Target.
Transparency and communication in ESG
According to the report, companies intending to incorporate these initiatives internally should do so with transparency from the outset. Leaders should foster open discussions on these topics, emphasising the inclusion of all ideas without negative consequences for stakeholders. Rather than expecting employees to conform to someone else’s notion of ESG, leaders would be better served by soliciting their own employees’ opinions on the company’s ESG role and how they can contribute effectively.
CFOs should acknowledge that some employees may have reservations about ESG-related initiatives. However, creating an open environment enables employees to feel included while fostering authenticity in the workplace, a desirable quality for tomorrow’s workforce when choosing an employer.
The report concludes, leaders can channel the pressures they feel regarding ESG into constructive conversations about the organisation’s goals, aspirations, and preferred direction while determining which subsets of ESG compliance to prioritise initially.
A link to the full report can be found here.
