Environmental, social, and governance (ESG) issues increasingly influence how business is conducted globally. Stakeholders demand greater transparency and action on a full spectrum of ESG issues. CEOs who do not take a forward-thinking approach to mitigate ESG risks will face the wrath of not only regulators, but also investors, lenders, customers, suppliers, and employees, according to GlobalData, a leading data and analytics company.
GlobalData’s latest Thematic Intelligence report, “ESG Framework (2024 Edition),” reveals that ESG risks are intensifying. Numerous companies have come under financial, legal, and public pressure for failing to properly address the key ESG issues. CEOs like Sam Bankman-Fried of FTX have been jailed for poor governance, while questionable carbon offset schemes have resulted in negative press for the likes of Disney, Apple, and Shell.
A US government investigation in 2024 found that several major automotive companies, including BMW, Jaguar Land Rover, and Volkswagen, had tangible links to forced labor across their supply chains, and banks like Goldman Sachs and BNY Mellon have been fined for greenwashing, the practice of exaggerating environmental credentials for marketing purposes.
Pinky Hiranandani, Senior Thematic Intelligence Analyst at GlobalData, comments: “ESG is a complex and wide-reaching subject that is often approached in a piecemeal, reactive manner. Companies must ensure all aspects of sustainability are covered in their ESG strategy by adopting a holistic approach that encompasses all ESG issues. In 2024, companies will be under pressure to be more transparent about their ESG credentials.”
Companies worldwide are hurriedly adapting their operations and supply chains to manage an influx of new ESG-related regulations. This includes mandatory ESG reporting, emissions pricing, and laws governing supplier due diligence.
Companies that do not take a systematic approach to identify and mitigate ESG risks will find themselves constantly on the back foot, always responding to the near-term regulatory deadlines, and failing to properly strategize for the longer term.
Hiranandani concludes: “To survive, companies must transition to a world of sustainable profits. The companies set for success over the 2020s will be those that can identify risks well in advance, mitigate them, and turn them into opportunities.”
About GlobalData
4,000 of the world’s largest companies, including over 70% of FTSE 100 and 60% of Fortune 100 companies, make more timely and better business decisions thanks to GlobalData’s unique data, expert analysis and innovative solutions, all in one platform. GlobalData’s mission is to help our clients decode the future to be more successful and innovative across a range of industries, including the healthcare, consumer, retail, financial, technology and professional services sectors.
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