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Inter-Stakeholder Communications and Digital Transformation as Keys to Outstanding ESG Performance

Environmental, social, and governance (ESG) risk management is just as crucial to a company's success as its financial performance, according to today's business leaders. Revenue, operational expenses, liabilities, equity, financial risk, and other conventional monetary indicators no longer give the entire story.



Investors expect portfolio firms to demonstrate that they are limiting not only their contributions to climate change but also their exposure to its negative repercussions. Customers and employees like to engage with and conduct business with organizations that credibly reflect their beliefs. And regulators such as the United States Securities and Exchange Commission (SEC) is determined to require firms to present their stakeholders with standardized, decision-useful assessments of their sustainability risks, their plans for controlling them, and the resultant financial consequences.


The proclamation, pursuit, and demonstrated attainment of ambitious corporate ESG performance objectives is no longer a "nice to have"; it is a need.


According to the findings of the 2022 Benchmark ESG Survey: Business Leaders' Perceptions of Their Enterprise ESG Programs, this is not lost on business leaders in the United States. More than 500 respondents representing both privately held and publicly traded organizations in a variety of industries said that their companies had either previously implemented an enterprise ESG program or are now in the process of doing so.


The issue, however, is that respondents to the newest poll commissioned by Benchmark and performed by ClearPath Strategies indicated that companies are planning, executing, and operationalizing their enterprise ESG programs to satisfy short-term or even immediate goals.


In the same way, their ESG data collection, performance measurement, and reporting systems might not give them the number or quality of insights needed to produce continuous, financially smart ESG performance results, putting them at risk and costing them opportunities.


But, as detailed in a new Benchmark analysis of these survey results, there are two keys to cultivating the profitable, long-lasting, and otherwise self-sustaining benefits of an enterprise ESG program: improved inter-stakeholder communications and more efficient and actionable enterprise ESG data management and reporting processes. The road to securing both is paved with digital transformation.


Benchmark's analysis takes into account the differences in survey responses between two pairs of subgroups.


The first of these subgroup pairs refers to enterprise role, specifically the disparities between survey respondents who self-identified as "Vice President or above" and those who self-identified as "below VP level." Specifically, the results of the poll indicate that there may be a lack of communication and consensus between these two demographics regarding certain areas of corporate ESG programs.


There is evidence of a positive association between respondents' roles and their confidence in the efficacy of their ESG data collection and performance assessment activities, as well as their firms' ability to comply with the SEC's proposed climate risk disclosure regulation. The more prominent the position, the greater the confidence.


As demonstrated in Benchmark's report, the pursuit of ESG performance excellence may be jeopardized by a failure to operate in harmony toward agreed sustainability outcomes, resulting in the misallocation of time and resources.


The second subgroup pair analyzed by Benchmark is comprised of survey respondents who reported using in-house ESG data management and reporting systems and those who reported utilizing a system from an external source.


Respondents who said their firms used ESG tools from an outside vendor were more confident in their firms' ability to measure operational greenhouse gas emissions and follow the SEC's upcoming rules. Companies that used an external provider said they were happier with how their ESG data management and reporting systems worked. They also took a more balanced, data-driven approach to their ESG initiatives.


Download Benchmark's free eBook, Business Executives' Opinions of Their Enterprise ESG Program, for a detailed analysis of the findings from Benchmark's most recent study, as well as the insightful insights they give business leaders.


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