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EY: Society’s expectations for business action on ESG issues are intensifying

The percentage of board members and senior executives who believe that the pandemic has increased the expectations of consumers, workers, governments and society at large that businesses will lead the effort for positive social impact, environmental sustainability and growth without foreclosures, has increased significantly, from 66% to 84%. This is according to EY’s annual global survey, Long-Term Value and Corporate Governance Survey.

However, there is also an increase – from 28% to 43% – of respondents who find that boards lack sufficient commitment to making decisions that fully incorporate ESG criteria that would create long-term value. 55% say there is a significant difference of opinion among business leaders about how to balance short-term concerns with long-term investment and sustainable growth. This percentage jumps to 68% for presidents and non-executive members of boards of directors.

The survey, which surveyed 200 senior executives from 15 European countries and 25 industries, found a disconnect between the benefits of a company’s ESG strategy for inclusive long-term growth and leaders’ willingness to support it through corporate governance. governance. 66% of executives consider, first, long-term value through new ESG products and services, and second, resilience to ESG risks, as the top two benefits of incorporating ESG criteria into their corporate strategy. At the same time, 83% stated that they wish to establish mandatory corporate reports on environmental, social and governance performance, based on international standards.

The majority (82%) of respondents believe their organizations have made significant progress in implementing the controls and risk management systems required to address significant ESG risks. According to the executives surveyed, the top two challenges preventing businesses from responding to ESG issues are, externally, near-term financial uncertainty (85%) and, internally, a lack of commitment from boards of directors (43%).

EY’s analysis finds that if businesses are to take advantage of the opportunities arising from managing ESG issues, boards need to strengthen their governance with a new model around the function, composition and skills of their members , innovative reward and remuneration approaches, as well as effective ESG reporting, combined with investor engagement.

Commenting on the research findings, Mr Mr. Panagiotis PapazoglouCEO of EY Greece, said: “The pandemic has greatly enhanced the expectations of society, consumers, workers, but also investors, to promote issues related to the environment, society and governance. Businesses are actively trying to meet these expectations, as demonstrated by their engagement in the dialogue that developed around the United Nations Climate Change Conference in Glasgow last year.What is needed today is greater alignment among executives – who better listen to the long-term concerns of consumers, customers and of other stakeholders – and boards of directors, focusing more on the short-term needs of shareholders. This can only be achieved through new approaches to corporate governance and the establishment of ESG reporting based on international standards, for measurable, transparent and reliable results.”

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Source: Capital

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