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Forward-thinking companies will reward ESG performance

Home Infrastructure Environmental – Green Industries Forward-thinking companies will reward ESG performance

AROUND the world, 72% of companies now factor in ‘social concerns’ among their non-financial Environmental, Social and Governance (ESG) measures, and 50% actively factor in environmental concerns, with 37% and 34% factoring in customer and governance measures respectively. And the importance placed on these measures is increasing, according to CEO of 21st Century, Chris Blair.

Quoting the recently released Global Governance and Executive Compensation Group (GECN) report, Blair said that “social measures, diversity, equity and inclusion” showed massive growth. It’s entered into boardrooms in a big way”.

The GECN study (of which 21st Century represents Africa) Blair referenced was conducted over five continents and was a comprehensive study of ESG across the major corporations in each of those countries.

Unpacking the study in a presentation at the ITWeb Governance, Risk and Compliance Conference held last week., Blair revealed how in the short term, these ESG measures are playing off against total shareholder returns.

“The more ESG measures your company has got, the worse your total shareholder returns, but this is only in the short term,” said Blair. “This makes sense. Investing in ESG, on things like climate, your people, or on social conditions, for the future costs money, and you have to get the money from somewhere. So where do you get it from? The return to your shareholders.”

But as Blair explained, “this is the long game, and ultimately for those companies that prepare and invest, the wheel will turn.”

According to Blair, companies that invest in ESG now are positioning themselves for a future where investors and shareholders are increasingly concerned about ESG goal success and project viability, and investment will depend on ESG measures being in place. He, therefore, recommends that the reward fraternity begin building in greater reward strategy for executives who achieve those ESG goals.

This is bad news for a high percentage of companies in South Africa, which are not transforming, but rather greenwashing figures to claim more significant ESG benefits than they truly have. Blair explained how the study found that only 8% (STI) and 14% (LTI) of companies around the world disclose targets upfront (ex-ante). This means that many companies only report what they actually achieved and not what they hoped to achieve, thereby greenwashing their results.

The ITWeb Governance, Risk and Compliance 2023 Conference looked at re-imagined businesses and how they can manage new risks through business resilience and agility. The line-up of global experts shared their insights into new opportunities, combating risk and enhanced compliance strategies.

21st Century, a level 2 BBBEE company, is one of the largest Remuneration, Reward, HR, Organisation Development and Change Management consultancies in Africa, specialising in sustainable business solutions.

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