@Elnur| Dreamstime
ESG Investment A Priority for C-Suite

ESG Investment A Priority for C-Suite

Nov. 23, 2021
In a survey, 78% CFOs report their companies are integrating ESG expectations into both performance evaluations and compensation.

Since last year a lot of things have changed and that includes how companies are viewing their environmental, social and governance (ESG) investments. According to a new survey,  2021 Q3 CFO Survey,  by Grant Thornton LLP, 57% of chief financial officers (CFOs) have made it a priority to invest in ESG since the start of 2020, with 23% saying that ESG investments are much more important for their organizations than they were prior to 2020.

While some companies are waiting on word from the Securities and Exchange Commission to disclose regulation, many other companies see ESG as financial drivers.  The survey found that 17% of CFOs see ESG as a fundamental driver of financial success and another 69% say that ESG is either a top consideration or equally as important as financial success. Just 14% believe that ESG is a minor consideration or that financial results are the only thing that matters.

Shift in Attitude

“It was transformational when, two years ago, the Business Roundtable changed its statement on the purpose of a corporation from existing principally to serve shareholders to one that benefits all stakeholders, including consumers, employees and communities,” says  Jim Burton,  partner and leader of ESG & Sustainability services for Grant Thornton. “Today, CFOs and other business leaders increasingly see ESG as a key value driver that’s central to their mission and success.”

When asked about the biggest challenges facing their business, respondents’ concerns about ESG reporting and disclosures jumped from 13% in the second quarter to 27% in the third.

When polled about the desired end state of their ESG program, almost half (49%) of senior finance executives say they aim to be consistent with peers and stakeholder expectations, while 42% aspire to be known as market leaders and innovators.

Interestingly,  8 out of 10 (78%) CFOs report their companies are integrating ESG expectations into both performance evaluations and compensation.

Still Room for Improvement 

The maturity and reach of ESG evaluation and reporting is uneven, however. When asked about the extent to which they evaluate and report on ESG, only 18% of CFOs report across their entire value chain. Thirty-six percent of CFOs say they report on their own operations and immediate upstream/downstream, vendors, suppliers and customers; while 29% confined reporting to their own operations. A surprising 17% say they do not currently report on ESG at all.

“Most of those companies that are not currently reporting plan to start within the next two years,” adds Burton. “A company’s impact on society doesn’t end within the operational boundaries — and that’s now more apparent than ever. When you combine increased regulatory requirements with escalating supply chain, market and public pressure, organizations will have to disclose more to compete.”

Talent Still an Issue

ESG further complicates the war for talent, according to the survey, ESG is also adding a new layer of complexity to an already challenging employment landscape.

When CFOs were asked which stakeholders are pushing their organization to enhance maturity of their ESG programs, employees (42%) were the most commonly cited group, followed by organizational leadership (39%).

When ranking the top ESG issues for their organizations, employee retention and development (35%) was at the top of the list. Diversity, equity and inclusion (30%) followed close behind, while employee health and safety (27%) took third place.

“ESG isn’t just something you worry about with investors, customers and regulators,” says  Majorie Whittaker, an SEC Regulatory Matters and ESG & Sustainability managing director at Grant Thornton. "Employees want to work for employers that share their values, embrace diversity and demonstrate real care for their well-being and advancement. It’s going to be an increasingly important differentiator in recruiting and retention — employees are looking to align their values with their paychecks.”

Talent shortages seem to imperil strategies but ESG is hardly the only concern for CFOs. A strong majority (70%) of respondents are now worried talent shortages jeopardize their ability to meet short-term strategies — up from 64% in Grant Thornton’s second-quarter survey 

Concern about controlling overall employee benefits costs also increased to 70%, up from 68% in Q2.

Meanwhile, plans to return to a full-time in-office culture dropped to 28% from 33%, while plans for a hybrid employment model jumped to 59% from 50%.

When CFOs were asked about their top workforce priorities for the next 12 months, several talent issues topped the list: 49% indicated that attracting and retaining talent was a top priority; 47% saw managing a hybrid workforce as a top priority; 45% claimed maintaining or improving culture was a top priority; and 44% saw addressing employee work-life balance concerns as a top priority.

Other Survey Highlights

When polled about the current state of the U.S. economy over the next six months, a majority (69%) of CFOs say they are optimistic. When asked about issues that could imperil their business, CFOs were most concerned about the continuing pandemic (52%), workforce shortages (51%) and supply chain disruptions (48%). On the positive side, another 48% of CFOs anticipate that infrastructure legislation could aid their business.

CFO responses were also scattered across a variety of choices when asked what steps they plan to take to mitigate negative impacts from business disruptions. Fifty-four percent say they plan to develop new or significantly updated disruption scenarios and action plans, while 39% say they are looking to increase investment to bolster output. Just over a third (37%) of CFOs plan to make immediate changes to operating models, while 35% plan to increase focus on cash flow and liquidity.

“The economy presents some immediate opportunities for growth, but the pandemic has taught CFOs that their existing plans to recognize and deal with potential disruptions were inadequate,” says Enzo Santilli, national managing partner of Transformation at Grant Thornton. “Most organizations are implementing new and broader definitions of risk and acting to bolster their resiliency and agility.”

The Q3 survey also found that CFOs are expecting expenses to rise across the board. In fact, 59% expect cybersecurity expenses to increase, while 55% expect IT and digital transformation expenses to rise. Not surprisingly, just 34% of CFOs expect real estate expenses to go up.“CFOs are planning to invest in operations to boost growth,” adds Santilli, “but they are also looking to maintain reserves and keep a close eye on cash flow and liquidity.”

Ultimately, the Q3 survey revealed that CFOs are fairly confident that the economic recovery from the COVID-19 pandemic will continue, but workforce concerns and ESG readiness will continue to dominate CFO time and attention.

About the Author

EHS Today Staff

EHS Today's editorial staff includes:

Dave Blanchard, Editor-in-Chief: During his career Dave has led the editorial management of many of Endeavor Business Media's best-known brands, including IndustryWeekEHS Today, Material Handling & LogisticsLogistics Today, Supply Chain Technology News, and Business Finance. In addition, he serves as senior content director of the annual Safety Leadership Conference. With over 30 years of B2B media experience, Dave literally wrote the book on supply chain management, Supply Chain Management Best Practices (John Wiley & Sons, 2021), which has been translated into several languages and is currently in its third edition. He is a frequent speaker and moderator at major trade shows and conferences, and has won numerous awards for writing and editing. He is a voting member of the jury of the Logistics Hall of Fame, and is a graduate of Northern Illinois University.

Adrienne Selko, Senior Editor: In addition to her roles with EHS Today and the Safety Leadership Conference, Adrienne is also a senior editor at IndustryWeek and has written about many topics, with her current focus on workforce development strategies. She is also a senior editor at Material Handling & Logistics. Previously she was in corporate communications at a medical manufacturing company as well as a large regional bank. She is the author of Do I Have to Wear Garlic Around My Neck?, which made the Cleveland Plain Dealer's best sellers list.

Nicole Stempak, Managing Editor:  Nicole Stempak is managing editor of EHS Today and conference content manager of the Safety Leadership Conference.

Sponsored Recommendations

Fitting in Fast: Making a Safe Workplace for New Hires

Sept. 12, 2024
Over a third of nonfatal injuries happen to workers who have been with their current employer for less than a year.

Elevating Safety: Empowering Supervisors to Become Safety Advocates

Aug. 27, 2024
Explore the skills, knowledge and techniques that supervisors need to effectively manage the safety of their crew. This guide will examine the causes and symptoms of supervisory...

Top 10 Causes of Distracted Driving—and What They All Have in Common

Aug. 27, 2024
The results reveal the top ten causes of distracted driving, and make it clear that not all distractions are created equal.

Spotting Workplace Safety Heroes: A Guide to Identifying Your Champions

Aug. 27, 2024
No two workplace safety champions are identical. But almost every single one of them has at least one standout quality that helps them excel. Here are some of those qualities ...

Voice your opinion!

To join the conversation, and become an exclusive member of EHS Today, create an account today!