Survey: ESG is maturing, but the ‘culture’ needs changing

Over the second half of last year, Sustainable Views invited senior decision-makers to take part in a survey designed to understand the level of corporate maturity in dealing with environmental, social and governance (ESG) principles. This covered questions such as: when did sustainability become a ‘strategic’ priority? Who is in charge of this agenda, and whose job is it to enact it? Are corporate boards capable of monitoring and guiding this process?

In partnership with headhunter Egon Zehnder, we polled a total of 329 professionals across 53 countries and industries from financial services to industrial and energy companies. We also conducted several one-on-one interviews to complement the poll. Egon Zehnder has published a report with its findings, including several testimonials. Below is our analysis, featuring comments from some of the bankers, investors and sustainability experts we spoke to. 

Strategic priority

According to two-thirds of respondents, the corporate sustainability agenda belongs to the CEO, while 60% say the chief sustainability officer, or an equivalent position, was in charge of delivering on that agenda. The existence of such a role arguably points to a certain level of acceptance that ESG factors are relevant to business. For 40% of respondents, sustainability became a strategic priority between two and three years ago. 

The survey also confirms the role played in this space by external sustainability advisers, with 26% of respondents relying on such services to understand ESG issues. Similarly, 47% of respondents say they rely on ESG ratings to a high or very high degree in order to make their investment, financing or capital raising decisions.

Respondents generally feel that their organisation’s board of directors is well equipped to monitor sustainability threats as well as opportunities, but those who expressed concern (16% of total) believe that lack of relevant skills is the biggest reason behind lack of preparedness, followed by management’s and shareholders’ conflicting priorities, and lack of sufficient or sufficiently good data. 

More broadly, the most commonly cited hindrance to sustainability is corporate culture.

Didier Duret, chairman of Omega Wealth Management, agrees that before looking at sustainability metrics, it is important to address a company’s culture. “ESG is just a tool; it’s part of the infrastructure thinking — there are many tools, ratings and frameworks,” he says. “But you can’t really address [sustainability] without a very deep conversation at the board, without touching the identity of the firm, its corporate culture and addressing how a [sustainability] agenda should impact the purpose of the firm.”

Corrado Passera, founder and CEO of digital bank Illimity, and a former economic development minister in Italy, believes there are three levels of corporate responsibility. “First of all, you look at the utility of what you do: am I doing something that has a positive impact? Providing credit to small businesses and supporting their growth — to us, this is useful,” he says about Illimity, which works with small and medium-sized companies that may fall through the cracks of traditional banking models.

Second, he says, is how they do banking, which includes the way in which a company operates in the community and in relation to the environment, encompassing everything from not being wasteful and aiming to be carbon neutral, to how and how much it invests on employees and ensures diversity. Third, companies need to look at how they are supporting their values outside the organisation. “As a bank, we apply ESG principles in our relationship with clients and in credit valuations,” says Mr  Passera.

Once a company’s culture and value to society is established, working on ESG data and models presents a new set of challenges. In terms of environmental commitments, Roberta Marracino, head of group ESG and impact banking at UniCredit, says that the challenges of planning over a time horizon that is considerably longer than a typical business plan are not trivial. 

For example, in the case of analysing commitments to net-zero targets, she says: “The methodology requires to plan over a 30-year time horizon with about 60% of the data you need.” Unsurprisingly, these issues are mentioned time and time again in our survey.

Link to diversity

Ultimately, sustainability also relates to diversity. In the US, Wendy Cai-Lee, founder and CEO of Piermont Bank, says much of the lender’s work is with businesses owned by women and ethnic minority clients, which “tend to have the hardest time in getting bank finance”. Ms Cai-Lee has noticed this challenge throughout her career in financial services (which included roles at Deloitte, JPMorgan and East West Bank), and says this difficulty has always seemed at odds with the fact that most economies in the world, including that of the US, rely on the entrepreneurial spirit of such clients. 

Silvia Fazio, a partner at law firm Norton Rose Fulbright, believes things are beginning to change, at least when it comes to gender. “[There has been] a great change over recent years in the way [our firm’s] leadership has been addressing diversity and inclusion, and how this ended up impacting the whole culture of the firm,” she says. “Part of this is driven by our own employees and clients: it is important to have robust diversity and inclusion policies to attract and retain talent; equally, they are key to maintain and gain new clients.”

Ms Fazio, who is based in Brazil, is also the founder and chair of not-for-profit WILL: Women in Leadership in Latin America. She has noticed a growing and more general corporate awareness about the importance of diversity. Whether driven by genuine commitment or a perceived reputational need, this awareness has benefited organisations such as WILL, she adds.

“Companies and their leaders have developed an increasing interest in WILL’s projects,” she says. “Many companies, in addition to offering financial support to our programmes, encouraged their senior executives to join our various committees and initiatives. This has led to a range of new ideas and projects. Our new EBWL [empowering black women into leadership] programme, launched in 2021, is a result of that.”