ESG strategies are having to withstand and adapt to a rapidly changing environment. CEOs are evolving their approach to reflect changing priorities, and in many markets shifting stakeholder pressures.
Our research shows that purposeful, sustainable growth remains an ambition for business leaders everywhere. 69 percent of CEOs globally (43 percent in ROI and 60 percent in NI) say although they have retained the same climate-related strategy in the last 12 months, they have adapted communication (both language and terminology) to meet changing stakeholder needs.
Meanwhile 57 percent of respondents in ROI and 40 percent in NI report to have evolved their strategy to meet those needs. As noted, our research shows that changes triggered by technology, regulation and continuing uncertainty geopolitically are weighing on CEOs minds – far ahead of environmental threats.
Perhaps reflecting slower than expected technology gains, when it comes to decarbonising their operations, 40 percent of CEOs in both ROI and NI are not confident they will meet Net Zero goals by 2030. This is almost double the figure of 21 percent reported globally.
The economic case
Without true guidance from leadership, the choices needed to unlock real value from ESG strategies will fall short.
The business case for ESG initiatives is well considered with 63 percent in ROI and 57 percent in NI fully embedding ESG into their organisation as a means to create increased value. This is lower than 65 percent reported globally.
However, CEOs are pragmatic about the possible return of ESG investments, with a large majority in both ROI (77 percent) and NI (90 percent) believing it will be between three to seven years before this materialises. There is also an understanding of the broader impact of ESG strategies across all facets of business.
Only 7 percent of business leaders in ROI and 13 percent in NI expect driving financial performance to be the greatest impact of their ESG strategy in the next three years, in line with 10 percent globally.
Instead, CEOs feel that the greatest benefit lies in attracting the next generation of talent (47 percent in both ROI and NI) and strengthening employee engagement and employee value proposition (27 percent in ROI and 30 percent in NI) will be the most significant effects. This compares to 9% globally.
For Russell Smyth, Head of Sustainable Futures at KPMG, the understanding that ESG strategies can achieve much more than purely increased growth is key; “Base your efforts in a strong strategy, led by a solid vision. Real change happens best when leaders are clear and focused on the end goal. Without true guidance from leadership, the choices needed to unlock real value from ESG strategies will fall short.”
Shifting pressures
Our findings highlight the challenge of navigating environmental, social and governance priorities for today’s CEOs. Alongside a growing awareness of ESG’s impact on trust and reputation, the increasingly polarised nature of the ESG agenda in many markets is heightening the pressure felt by business leaders. CEOs from this island operating worldwide are well advised to understand and consider the often different dynamics that may pertain elsewhere.
More than half of CEOs globally (60 percent) believe that as trust in governments decline, consumer and public expectation of them and business are high to help fill the void on societal challenges. This is down four points from 64 percent in 2023, and down 11 percent from 71 in 2022.
This trend is not reflected in our findings in Ireland with 80 percent of those in ROI and 67 percent of those in NI believing the public is increasingly looking to businesses to step in and fill the void, up considerably from 57 percent and 50 percent respectively in 2023. This suggests that although a changing socio-political landscape may be evident globally, it isn’t currently a feature here.
Evolving stakeholder outlooks is also reported globally, with 38 percent of CEOs reporting that expectations are changing at a pace faster than organisations can manage in adapting their strategies. This pressure is also reflected in Ireland with approximately a third (33 percent in ROI and 30 percent in NI) reporting similar effects.
In 2015, CEOs worldwide ranked environmental risk as their least important priority risk; almost a decade later in 2024 respondents globally tell us that the biggest downside of failing to meet ESG expectations would be to give their competitors an advantage, coming out ahead of threat to their own tenure and recruitment challenges.
In ROI the biggest impact would be loss of customers whilst north of the border in NI a loss of customers ties with competitors gaining a competitive edge as the greatest negative impact of not meeting ESG expectations.
Meeting reporting standards
Effective reporting not only meets regulatory expectations, but also enhances transparency and accountability.
ESG is a double headed topic for business leaders combining both a strategic lever to help organisations identify risk and leverage opportunity and a compliance requirement.
60 percent of CEOs in ROI and 63 percent in NI agree that they have the capability and capacity required to meet new reporting standards. For the second year running this is lower than the global average of 76 percent and continues to be a concern given mandatory reporting requirements.
Emer McGrath, Head of Audit at KPMG in Ireland says: “As non-financial reporting becomes a key governance matter for organisations, it must be prioritised. There is now a real need for businesses to integrate ESG considerations into their core strategies. Effective reporting not only meets regulatory expectations, but also enhances transparency and accountability.”
As noted, the lack of appropriate technology solutions has been cited by CEOs in ROI as the most significant barrier to achieving net zero, with almost a third (30 percent) saying that the tech doesn’t yet exist to solve the challenge. Meanwhile for those in NI the complexity of decarbonizing supply chain leads the way with 30 percent, in line with global results at 30 percent.
Other major concerns include a lack of skills and expertise to implement solutions, the complexity of decarbonising supply chains, the cost of decarbonisation, and a lack of internal governance and controls.
Critically, as we look to 2025, when many organisations will be reporting on environmental targets, the complexity presented by the decarbonisation of their supply chains is an issue further compounded by current geopolitical tensions around the world and events affecting many of our main trade routes.
Questions to consider
How well resourced are you to ensure you achieve your ESG compliance obligations?
Should you assess a more formal split of your ESG plans into individual components to help focus on delivery?
How realistic are your net zero or sustainability commitments and do you need support in reassessing your plans?
How well matched is your ESG approach to talent acquisition and retention given its potential importance to your people?
Actions to consider
Take the lead on ESG and consider splitting it into its constituent parts to help get clarity on what matters and where you are well placed and where you need help.
Ensure you understand your ever changing regulatory obligations and get external support if you need it. And see ESG matters as being beyond compliance as both a talent magnet and value creator.
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Queries? Get in touch
If you have any queries about embedding ESG in your business, please contact our team below.
We'd be delighted to hear from you.
Russell Smyth
Partner, Head of Sustainable Futures
KPMG in Ireland
Emer McGrath
Partner, Head of Audit
KPMG in Ireland
