By: John McCalla-Leacy, Head of Global ESG at KPMG
The world is in motion. The climate crisis is now daily news and we are witnessing the damage that inaction can cause to our planet. For business leaders, there is a growing number of risks and daily challenges. Geopolitical and economic uncertainties are impacting companies’ ability to function and focus on growth, and corporate response to the climate crisis has become a political hot potato. With that in mind, it is understandable that environmental, social and governance topics are at risk of disappearing from the priority list in boardrooms.
As Head of Global ESG at KPMG, it will come as no surprise to you to hear me talk about the urgency of ESG. The reality – supported by a significant amount of evidence – is that it does matter and cannot be ignored. Political leaders will make bold commitments, and business spokespeople will link the rhetoric to ambitious targets and figures that aim to move towards ‘dealing’ with ESG, but we must all accelerate the current pace of change if we want to minimize the impact. in the area.
KPMG’s CEO Outlook is an annual snapshot of business confidence. We spoke to more than 1,300 CEOs from some of the world’s largest companies, across a range of industries and countries. One of the topics – ESG. Comparing our 2023 findings with last year, there is evidence that leaders are ‘softening’ their approach to ESG, but it is encouraging that in an economically challenging and politically polarized environment, CEOs remain steadfast in most environmental, social and governance areas in their commitment to bringing about positive change.
I’m based in Britain, where the Prime Minister has announced plans to postpone a number of environmental targets, including the planned phase-out of diesel and unleaded cars, to ‘reduce the burden on the public’. Despite the potential shift in gear, leaders have continued to emphasize that the country will remain focused on achieving its global climate goals. This example sheds light on similar challenges that business leaders face as they try to appropriately respond to different viewpoints while staying true to the vision of truly tackling the climate crisis.
Our CEO Outlook survey shows that just over a third of senior executives say the language they use internally and externally to talk about ESG has changed. Although slightly lower than last year, it shows the pressure leaders are facing to tackle the growing politicization of the issue. On a more positive note, CEOs recognize that changing political landscapes leave a void that companies should fill. 64 percent of leaders told us they understand that CEOs have a role to play in filling the void of societal change that can be created during times of political unease – largely in line with last year’s findings.
I’ve spoken extensively about the unbreakable bonds between the E, S and G. Simply put, you can’t tackle issues like governance and social inequality without recognizing challenges like the climate crisis and sustainability.
For CEOs, E, S and G are important. We are witnessing a wave of new regulations – across countries and broader regions. Politicians, the public and investors are increasingly looking at the positive and negative impact that companies can have on the world and expect us to demonstrate transparency and genuine commitment as change makers.
Nearly three-quarters of CEOs in this year’s survey acknowledged that their current ESG progress is not strong enough to withstand potential criticism from stakeholders or shareholders. Again, that figure is largely consistent with 2022 findings. To some, it may seem like a disappointing statistic. For me it’s reassuring. CEOs know they can do more and are willing to say their companies can and should take action now. Business leaders must question their own investment decisions, business model and operations while listening to their customers and employees. Only then can they ensure their organization is fit to take advantage of the opportunities this net-zero transition creates, while remaining resilient in the face of its challenges. I remain optimistic that, regardless of the rhetoric, business leaders recognize their role in ensuring sustainable economic growth that benefits everyone and respects and cherishes our fragile planet. Now is the time for all of us to take action.
John McCalla-Leacy is Head of Global ESG at KPMG International