Organisations are struggling to make ESG work strategically because they are often unable to move away from a compliance agenda, according to a report by the consultant KPMG.

While most companies recognise that ESG should be a valuable tool for enhancing their financial performance, resourcing constraints and internal business silos are making it difficult to integrate sustainability goals with long-term objectives. 

Investing in change

But 90 per cent of businesses said that they were increasing ESG over the next three years to help fix these issues. Many (43 per cent) said they were recruiting dedicated ESG personnel, adopting specific ESG software (40 per cent) and investing in employee training and education (38 per cent). In addition to these measures, by focusing on data management and systems, 83 per cent said that they anticipated better integration across roles within the business.

“ESG data management software and advanced tech like AI enables organisations to efficiently track, analyse and report on ESG-related data, which is crucial for making informed decisions and meeting regulatory requirements,” the report said. “Defining clear roles and responsibilities, including identifying leaders and subject matter professionals, and deciding when to outsource or supplement existing resources, is crucial for effective implementation and efficient reporting.”

Increasing financial focus

Sustainability issues are expected to become more embedded in companies’ financial foundations processes, according to a report by Thomson Reuters. Almost one-third of CFOs reported examining the potential effects of climate change scenarios on financial outcomes in 2023. That included looking at issues such as the valuation of tangible assets, goodwill and other intangible assets. 

“The amalgamation of sustainability, finance, and business strategy reflects growing recognition that sustainability and financial stability are not opposing goals but are fundamentally intertwined,” said the report. “As a result, closer integration of finances and sustainability will grow as a priority in the domain of CFOs, financial controllers, and corporate finance and accounting professionals.”