Between preparing for a possible recession, trimming costs, and dealing with ongoing supply chain problems, fewer business leaders are prioritizing environmental, social and governance (ESG) issues.
Indeed, a recent GlobalData study finds economic disruption has cooled corporate focus on ESG. Another KPMG survey, meantime, reports that while 45% of CEOs consider ESG programs “an intrinsic business imperative” impacting financial resilience, growth, and stakeholder expectations. Half are nonetheless pausing or reconsidering their ESG efforts for the next six months, and 34% have already shelved them.
This cannot happen if organizations expect to not only survive the economic downturn but emerge from it stronger, better, and fit for the future.
Every recession has its winners and losers. Winners are those that resist going into pure survival mode and, instead, adjust their business models to continue investing in promising business opportunities. For example, during the Great Recession (December 2007 to June 2009), we saw companies like Netflix innovate with new streaming services that ultimately replaced mailed discs and video stores. Toymaker Lego similarly chose that time to expand into a global market and reached new profitability heights as a result. The marketing automation platform Mailchimp, meanwhile, grew from 85,000 to 450,000 users by giving SMBs the unprecedented opportunity to try its service by sending up to 2,000 emails per day for free.
What all such winners have in common is recognizing the imperative to look beyond immediate pressures and invest in innovation they believe could lead to long-term differentiation, competitiveness and growth.
That’s how companies need to think about ESG, and especially corporate commitments to environmental sustainability. Every year, Vodafone’s Fit for the Future report examines the traits that successful companies apply when getting their workforces ready for what’s to come. We know from our latest study, published in December, that more than 60% of high-performing U.S. firms view sustainability as a potential differentiator and more than half (55%) have made it a strategic goal.
Winning businesses also see a direct correlation between sustainability and shareholder returns. Half of U.S. firms reporting higher profits, for instance, had an ESG program in place that led to improved performance, our study found. Conversely, only 22% of firms with lower profits invested in ESG.
In addition, companies investing in ESG programs are able to hire and retain more top talent than those that are not, research suggests. In fact, although the urgency to find employment in a down economy might sometimes take precedence, a company’s environmental record is a factor for 70% of U.S. job seekers, according to a 2021 Gallup poll. A KPMG survey of 6,000 UK workers, students, and apprentices also found 46% want the company they work for to demonstrate a dedication to ESG and 20% said they’ve turned down job offers when the employer’s ESG efforts were not in line with their values. As a direct result of such pressure from workers, 30% of companies now set ESG targets, according to the GlobalData study.
Implementing solid ESG programs starts with making the conscious business decision to do so. But it also requires making fundamental changes and investment for more durability, resiliency, and responsibility. Critical areas where U.S. firms said technological breakthroughs will be needed, according to our Fit for the Future report, include: adopting renewable energy (44%), reducing energy consumption from digital devices (37%), and using more organic or biodegradable packaging materials at work (36%).
Employers also need to consider deploying modern tools and technologies to hybrid or remote work scenarios, which reduce carbon emissions. Most already have a head start on this given government-enforced quarantining during the global pandemic, which 67% of businesses say was a catalyst for ESG efforts, according to GlobalData.
Companies can continue the momentum by investigating diving into the metaverse with augmented reality (AR) and virtual reality (VR) tools that enable more online work and collaboration. They could also invest in buses or rideshare services to bring large groups of hybrid workers to their office, much as Microsoft has done with Wi-Fi-connected shuttles that help their employees avoid long, pollution-emitting commutes.
ESG programs are no longer merely nice-to-haves. Our constantly dwindling environmental resources combined with their clear business advantages make them must-haves. That does not change in a tough economy. If anything, such efforts become even more important to becoming fit for the future.
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