Greenhouse Gas Emissions lead the charge in Perennial Better Future’s ESG survey

From

Emilie O’Neill

Greenhouse Gas (GHG) emissions and alignment with the Paris Agreement have displaced cyber security as the key ESG priority for companies over the next 12 to 18 months in the annual 2023 Perennial Better Future Survey.

Nearly half the respondents to the Survey selected GHG emissions as a top three issue. Emilie O’Neill, Co-Head of ESG and Equities Analyst of the Perennial Better Future Trust, said: “This may represent the increasing national focus on environmental concerns as well as global reporting standards increasingly prioritising environmental reporting.”

Cyber security was placed second and diversity and inclusion third in the Survey, O’Neill stated that an encouraging trend evident from the Survey was increased ESG accountability, with more dedicated ESG staff and increasing senior and board level oversight.

“ESG-based KPIs are increasingly more common, although the focus remains on STI (short-term incentive) KPIs. Pleasingly, 62 per cent of companies have ESG or sustainability as a specific KPI versus 45 per cent in 2022. But there is a significant size effect in the data, with 63 per cent of smaller companies indicating that they do not have remuneration associated with ESG as a KPI compared with 24 per cent of larger companies.”

She added that 75 per cent of companies now have a dedicated ESG/Sustainability person or team dedicated to ESG matters. “This represents an increase on 2022 results, in which 49 per cent had a dedicated resource – indicating the increasing importance corporates and other stakeholders place on these issues.

“The percentage of companies with a dedicated senior executive responsible for ESG/ Sustainability increased slightly to 78 per cent from 71 per cent in 2022, important for top-down accountability. Companies with a dedicated board member also increased to 50 per cent in 2023 from 44 per cent in 2022.”

O’Neill said that nearly two-thirds of companies believed that ESG and Sustainability provided profit opportunities for their business, while 83 per cent indicated tackling these issues meant additional costs. When asked how important respondents think ESG and Sustainability will be to their business in the next five to 10 years, they were ranked 7.5 out of 10.

She said due to the lack of globally consistent sustainability reporting methods, companies found it challenging to navigate reporting frameworks and information disclosure, although this was likely to be improved by the incoming ISSB (International Sustainability Standards Board) standards.

“Most respondents identified that ISSB will help to standardise ESG disclosures, while 13 per cent think it will increase the reporting burden for corporates. Additionally, 44 per cent agreed or strongly agreed that sustainability reporting has become burdensome, up from 33 per cent in 2022 and 2021.”

The survey found that GRI became the most used framework for reporting ESG information in 2023. Task Force for Climate-Related Financial Disclosures (TCFD) and Workplace Gender Equality Agency (WGEA) followed closely behind.

The use of Sustainability Accounting Standards Board (SASB) increased significantly on 2022, and the Taskforce on Nature-related Financial Disclosures (TNFD) remained a minority. This year, slightly less companies did not report ESG or sustainability related information aligned with reporting standards at 22 per cent.

Half the companies surveyed have a Reconciliation Action Plan (RAP), with another 16 per cent expect to launch a RAP in the next 18 months.

Achieving gender diversity targets at a board and executive level remain a key focus, with difficulties in finding gender diverse talent pools the biggest stumbling block.

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