ESG - "Delaying is No Longer an Option"

Companies have realized the strategic importance of ESG, but only very few feel up to the task of implementing it. A study shows what can be learned from the pioneers in the field of environmental, social and governance.

The scope of the EU Corporate Sustainability Reporting Directive (CSRD) will expand to include all large companies from January 1, 2025. From that financial year onwards, they will be required to integrate their sustainability practices and risks in the areas of environment, social and governance (ESG) into their management reports in accordance with CSRD requirements.

ESG is Concern Number Two

From January 2026, the new rules will also apply to listed SMEs, small and non-complex credit institutions, and captive insurance companies. Finally, from 2028, they will apply to EU subsidiaries and EU branches of third-country groups. The step-by-step introduction of the directive will then be complete. "Delaying is no longer an option," warn the authors of the Roland Berger survey "Building green organizations." The analysis shows the state of ESG readiness among large companies. Are they focusing on simply meeting the requirements or are they already living a culture that embraces ESG principles beyond the requirements?

Executives from 128 companies worldwide provided the experts with information on the status quo of their ESG strategy. More than 70 percent of them are already legally required to comply with the requirements. 23 percent of them describe ESG guidelines and standards as the biggest challenge in the coming years. Only managing inflation and price increases (25 percent) is a greater concern. Digitalization (19 percent) and geopolitical risks (16 percent) follow at a considerable distance.

Companies Make ESG a Boardroom Issue

A good half of the companies place responsibility for ESG at the board level (48 percent). Around 50 percent of ESG managers report directly to the CEO. According to the authors of the study, anchoring ESG management at the highest hierarchical level is an indication of the strategic importance of sustainability goals. However, only 7.6 percent of the companies surveyed rate their sustainability performance as "excellent".

The majority – 40 percent – admit to being "moderately" to "poorly" positioned because, for example, responsibilities and budgets have not been assigned, managers are not committed and employees are not trained. ESG pioneers, on the other hand, seem to have made the leap from "reactively complying" with regulations to "proactively using sustainability issues to create added value".

According to the study, best-in-class companies are characterized by the following:

• Strategic organizational structure: 89 percent have special ESG units.
• Engagement at the management level: At 59 percent, ESG responsibility lies at the board level.
• Budgeting: 84 percent have a dedicated ESG budget.
• Employee training: 87 percent provide special ESG training.

This is a partly automated translation of this german article.