Foreword: A growing sense of urgency in ESG
At GlobalData, we define a theme as any disruptive trend or technology that keeps a business leader awake at night. Companies that invest in the right themes become success stories. Those that miss the essential themes in their industry end up as failures.
ESG is one of the most important themes of the decade. The Paris Agreement, the global agreement to limit global warming to 2°C above pre-industrial levels, has been signed by 195 countries, including the US and China. As part of the agreement, many signatories need to reduce their emissions to meet 2030 emissions targets, which is creating a growing sense of urgency as we move closer to the end of the decade.
This pressure feeds through to corporates, which must now navigate mandatory sustainability reporting, new rules on environmental due diligence, emissions pricing, and financial incentives to use more sustainable sources of energy.
Many major corporates are well ahead of the regulation and have already started investing in improving the environmental impact of their business. They are changing the way they manage environmental data so that they can bring it up to the robustness of regulated financial data. They are investing in technological solutions to reduce their carbon footprint and understand the emissions generated by their supply chain and use of their product or service. Many corporates are insisting that suppliers and key business partners have commitments to cut their emissions.
Key to all of this is establishing the right governance structures early on to lay the foundations for long-term success. Developing and executing a successful ESG strategy is now going to require the involvement of more teams and senior figures.
While ESG drives internal business transformation, companies need to rein in ESG-related marketing and external communications. Terms like ‘climate neutral’ and ‘eco-friendly’ now invite unwanted attention from regulators keen to crack down on greenwashing as well as the anti-ESG movement. The anti-ESG movement has become especially strong in the US, where ESG has become a hot political topic, and poses a risk to any company that pushes ESG in its marketing.
