Chief financial officers have made it a priority to invest in environmental, social and governance efforts, with a wide majority saying the goals are just as important as financial success, according to a new survey.
The third quarter survey by Grant Thornton LLP shows that nearly 70% of CFOs who responded say ESG is either a top consideration in their companies or equally as important as financial success with another 17% saying ESG initiatives are a financial driver of their companies. Neary a quarter of respondents say ESG investments are much more important to their organizations than they were prior to 2020.
About half the respondents say they aim to be consistent with their peers and investor expectations regarding ESG initiatives. Another 42% of the CFOs say they want to be market leaders and innovators. Only 14% say that ESG is a minor business consideration.
Those ideas come as investment in ESG and sustainability initiatives are expected to see double-digit increases in 2022.
The biggest challenges facing the leaders and their ESG efforts are reporting and disclosures. Those issues are more of a concern to CFOs in the third quarter of this year, with 27% saying reporting is an issue, up from 13% in the second quarter.
Overall, just 18% of CFOs say they report their ESG results across their entire value chain. That jumps to 36% regarding reporting on their own operations and immediate venders, suppliers and customers. There were 17% who say they do not report on ESG at all.
“Most of those companies that are not currently reporting plan to start within the next two years,” says Jim Burton, partner and leader of ESG and sustainability services for Grant Thornton. “We’re likely to see the reporting efforts continue to spread and deepen across value chains for all organizations, especially with so many organizations looking to be recognized as ESG leaders.”
ESG standards and reporting have become important in business. Earlier this fall more than 200 businesses in the United States and Europe sent letters to government officials asking for international standards, which would help improve overall sustainability and financial transitions.
The respondents to the Grant Thornton survey also viewed supply chain issues as an immediate concern, with 53% worried about disruptions or shortages. Although 40% say potential regulatory changes related to ESG standards and reporting would be a positive for their companies.
Additionally, more than half the CFOs say they will need to develop plans to mitigate disruptions from negative consequences to their businesses such as potential supply chain impacts.