Study:“Expectations Of What Makes A Good Business Have Changed Forever”

(MENAFN- PRovoke) MILAN & LONDON - Businesses and governments across the world are failing to meet public expectations for ESG-related behaviour, according to the fourth annual ESG Monito r report from strategic communications, advocacy and research group SEC Newgate.

The survey of more than 14,300 people across 14 countries and territories reveals strong expectations from the public for governments to act responsibly on ESG issues, with 58% giving this an importance rating of nine or 10 out of 10.

A similar majority (54%) said the same for large businesses, while expectations are lower for small to medium businesses (37%).

However, people gave lacklustre performance ratings for all three groups when it comes to delivering strong ESG outcomes. Just over half rated governments and large businesses at seven or more out of 10, with a slightly more positive view towards small to medium businesses.

Almost two thirds of respondents (65%) also said that companies should play a more active role in society. There is also strong belief (73%) that performing well on ESG responsibilities doesn't have to come at the expense of profitability, while people overwhelmingly (78%) believe companies should act in the best interests of all stakeholders rather than prioritising shareholders ahead of other stakeholders.

In addition, the research found that awareness of the term 'ESG' was stable, scoring 54% globally versus 53% last year. Respondents in Hong Kong (43%), Singapore (41%) and UAE (39%) were more likely to say they had a good understanding of ESG, while Greece (11%), Colombia (11%), Poland (9%) and Spain (9%) had the lowest level of understanding.

A key demographic also emerged from the research: those aware of ESG were most likely to be male, aged under 50-years-old, university-educated and closely followed the news.

With regards to communicating concerns around ESG, 73% agreed that companies should more clearly communicate what they are doing to improve their performance on environmental, social and governance issues. And almost half (44%) of people polled said they didn't trust what companies said about their ESG activities or performance.

SEC Newgate group CEO Fiorenzo Tagliabue said:“Our global ESG Monitor has found that corporate communication shortcomings are clear to see, with a large majority believing companies need to more clearly communicate what they are doing to improve their performance on ESG issues and address stakeholder needs.

“Compliance with ESG reporting standards is just a starting point, it ensures business meets its regulatory requirements, but it does not signify excellence or an ambitious plan to drive impact through corporate operations.

“Clearly, a considered approach is needed to overcome scepticism, with many not trusting what companies claim about ESG and given that many believe companies focused on ESG initiatives are too politically focused. Business is under intense scrutiny on ESG issues, but failing to act ambitiously and failing to be transparent about your plans and achievements on ESG issues poses a significant reputational risk."

A new UK report has also been published for the first time this year alongside the local edition of the research. The 'Responsible Business Report: What the UK public expects' found that the public demands greater positive impact from companies, but don't think they are performing as well as they should on responsible business metrics.

UK investors have an even higher expectation of large companies conducting themselves responsibly than the British public (investors 81% vs non-investors 72%).

Only 42% of the UK public believe that companies and organisations of any size behave responsibly, with a significant performance gap between importance vs performance. SMEs are closer to delivering on public perceptions (13% performance gap) vs large businesses (32%). The UK government has the largest performance gap, with expectations of government highest (79%) despite lowest perceived performance (42%).

Three quarters (75%) say that change starts from the top and that it is important to have leaders who are focused on conducting business responsibly.

While the 2023 ESG Monitor found that the term 'ESG' was not widely understood by the public, the 2024 edition found that 'responsible business”' is far better understood, and is associated with positive attributes such as 'sustainability', 'responsibility', 'future-focused', 'green' and 'respectful' cited.

Building on this, SEC Newgate UK has published a new responsible business framework alongside the report, calling on good businesses to be sustainable, a good employer and supply chain partner, support their communities and to be an agent for positive change.

The framework outlines seven key elements to successful business:

• Companies are expected to focus on more than profit, they need to play an active role in society
• Conducting business in a responsible way is now an expectation
• There are strong expectations on business leaders to pave the way
• Retail investors exhibit stronger expectations of responsible business conduct, and will act if trust is breached
• The public want clearer communication on what companies are doing to improve their performance
• There is a fine balance to be achieved on when and how companies should speak publicly on issues that are not related to their business
• Younger generations expect businesses to take a stance on environmental and political issues.

SEC Newgate UK head of green and good Andrew Adie said:
“Expectations for what makes a 'good' business have changed forever. All of this takes place in a judgemental world fuelled by increasing scrutiny and activism where pledging to lead change isn't enough, business has to prove it is delivering.

“The pushback against ESG by critics – who call corporate responsibility out as 'woke capitalism' – continues to grow. Yet on the other side of the fence, activist, public and political voices are advocating for greater corporate ambition. Navigating this complexity and understanding how perceptions and expectations of business are changing is critical if corporates are to grasp the opportunities and avoid the pitfalls.”

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