The Ethics and Compliance Initiative (ECI) released new research in June titled “The State of ESG in the Workplace: A Fad or the Future?” The survey looked primarily at companies based in North America and the findings indicate that many ESG programs are maturing and integrating into companies. Here are some key findings:
- The quality of ESG programs increases with age:
“ESG is new. Sixty-seven percent of programs have been around for five years or less.
Programs are emerging, and there are not yet widely agreed-upon best practices. No single model of leadership exists. Half (51%) of programs are not well-defined yet, and only about one in three (35%) are well integrated across business operations.
Program definition and integration steadily improve alongside program age. The oldest programs were most likely to be well-defined in all program areas and to be very integrated throughout business operations. Conversely, the newest programs were the least defined and least integrated.”
- The focus is primarily environmental:
“When asked what percentage of their organization’s focus is given to each of the components of ESG, respondents, on average, gave higher marks to the environment (37%) and social issues (32%) than to governance (27%).”
- Leadership is buying in:
“Nearly all organizations (96%) with boards include ESG as an agenda item; many boards (44%) include a dedicated agenda item at least twice a year. Almost two in five boards (39%) include at least one member with specific ESG expertise.
Almost two in three organizations (62%) consider ESG targets in executive compensation decisions.”
What this Means
It’s not surprising that older ESG programs are seeing more success. It takes time for companies to acclimate to ESG and incorporate it fully into their operations.
The lack of focus on governance may be cause for concern. However, at an ECI webinar discussing the results, a panelist raised an interesting point: While many consider governance important, ESG programs often lay the governance groundwork early and therefore may not consider governance to be their current “focus.”
Seeing leadership buy-in is heartening. We frequently discuss the importance of leadership buy-in on PracticalESG.com and no program can be truly successful without support from leadership.
