Winmark C-Suite report 2022 & Beyond BLOG: ESG Challenges – and how to address them

For many C-Suite executives, providing meaningful evidence of meeting the relevant KPIs is as much a commercial issue as it is an ethical one – in one recent PwC survey, nearly 80% of investment decision-makers said ESG is an important factor in their choices. Regulators and consumers are also increasingly demanding evidence of compliance. 

So what are the practical issues and concerns for C-Suite executives as they struggle to set priorities and meet evolving expectations? 

During consultation with Winmark C-Suite network members to produce our C-Suite 2022 & Beyond report, we asked them what obstacles and roadblocks they were facing when seeking to refine and implement their ESG strategies.  

They revealed three key challenges: 

1/ Regulatory complexity 

• CLOs are particularly impacted by regulatory pressures and they identify regulatory risk as the single highest risk category they face in 2022.  
• Multinational organisations are particularly concerned about the complexities of managing multiple international regulatory regimes. 
• COOs are also grappling with regulatory complexity, and GRC (governance, risk management, and compliance) technology is becoming an increasingly valuable tool for departments to align, track and manage compliance. 

2/ Identifying, measuring and reporting sustainability targets 

• There is not an established gold standard for ESG ratings, and there is inconsistency between industries, regions and size of business. Navigating what is measured (and how) is difficult – particularly as different stakeholders will have very different priorities. Shareholders, consumers and employees will each have their own perspective on what is important. 

3/ Social 

• The ‘Social’ component of ESG is particularly broad and difficult to define and there is little consensus on what social outcomes should be. Social data are more likely to be qualitative, which also increases the risk of data inconsistency or inadequacy. 

So what can leaders do to address these challengers and help satisfy diverse stakeholder demands? Suggestions from our members include: 

1/ Harness the power of the C-Suite 

• Companies should embed ESG directly into their corporate strategy, with the CEO taking on the leadership role of communicating ESG priorities and inspiring employees. 

2/ Think holistically about your ESG story 

• Organisations should take an informed, honest and realistic approach that makes best use of annual reports, sustainability reports, and investor presentations. This process will clarify their corporate purpose, build understanding of key issues and enable a fact-based approach to public statements and marketing. 

3/ Drive towards common standards and greater transparency  

• Companies should leverage their best existing standards – if measures already exist that have a clear process and credibility, adapt and build on them rather than creating new measures. 
• Reporting should always be relevant to the corporate purpose, and be transparent and honest about both successes and failures. 

Identifying a clearly defined and realistic corporate ESG purpose will assist with navigating the complexity of stakeholder and regulatory demands. And delivering open, honest and accurate information – that always speaks to that purpose  – will help clarify what needs to be measured and reported. 

Winmark has created the world’s first FREE community of Chief Sustainability Officers, a place to share knowledge and learn from your CSO peers. Regular roundtable sessions led by experienced chairs, advisors and senior directors provide the opportunity to debate and discuss sustainability issues, leadership and strategy.