Environmental, Social and Governance (ESG) principles have gained significant traction as stakeholders have recognised that sustainable and responsible business practices must be front and centre in business strategy, planning and decision making.
Customers, Employees and Investors focus on non-financial factors only continues to gain weight in their decision-making process, whether that be to join a company, purchase goods or in making an investment.
Many key themes from prior years continue to evolve and gain importance, for example Carbon Neutral targets are evolving to Carbon positive goals. However new trends and focus areas are emerging that companies should be aware of, these include:
- Artificial Intelligence (AI) – AI, Cybersecurity and technology innovation more broadly is a growing focus amongst the ESG industry. With the rapid rise of AI technologies such as ChatGPT (OpenAI) the associated risks in developing and implementing these technologies need to be understood and addressed by boards and management.
- TCFD Reporting – Climate related financial disclosures continue to be a driving trend. The industry expects that commencing with the FY24/25 financial year, large entities and financial institutions will be required to use the framework to disclose climate risks.
- Supply Chain Focus – Accounting for a company’s entire supply chain footprint is becoming a key focus, stakeholders want to understand the full product journey.
- First Nations inclusion and empowerment – The referendum on an Indigenous Voice to Parliament will be a focus point in 2023. This continues from the establishment of the Raising the Bar by the Business Council of Australia (BCA) in 2019.
- Greenwashing – There has been an increase from regulatory bodies including ASIC who have been active in launching litigation against businesses found to be misleading the public on their environmental impact and practices.
- Diversity and inclusion – Australian entities will be challenged to collect diversity data broader than gender, and to act on this data with intentional and authentic diversity and inclusion plans.
A recent survey undertaken by CPA Australia “ESG Survey 2022” found that 93% of respondents reported that their organisations were employing ESG in some form. Not surprisingly this trend is even more prominent in larger entities. CPA also found that respondents that confirmed ESG adoption were 3% more likely to have reported growth in the past year.
Key drivers & barriers to ESG adoption
Seven Advisory provides unique ESG advisory services to companies, investors and entrepreneurs developing their social license to deliver long-term value. If you’re still wondering how ESG considerations need to be incorporated into your business policies, procedures and everyday actions then Seven Advisory can assist – Contact Us