ESG confusion will hamper business growth and environmental and societal change, says RSM UK
· 44 per cent of middle market businesses are unfamiliar with ESG which risks future business growth potential
· Of businesses familiar with ESG, 24 per cent are not making any attempt to measure the potential impact that its goals might have on the environment or society
- Of those who measure ESG performance 65 per cent report using nine different standards externally, showing the complexity of disclosure
- Government and regulatory bodies – here and around the world - need to work together to ensure rapid convergence and consistency so that businesses have clear guidelines to work within as they develop their strategies and reporting outputs
- The research comes as the UK Government prepares to publish findings from a consultation launched earlier this year proposing mandatory ESG reporting in line with the Task Force on Climate-related Financial Disclosure (TCFD).
New research reveals that business leaders are not familiar with Environmental, Social and Governance (ESG). For those who are, nearly a quarter (24 per cent) are not making any attempt to measure the potential impact that their ESG goals might have on the environment or society, and in turn the benefits a robust ESG approach could have on business and society.
The survey by leading audit, tax and consulting firm RSM UK revealed that almost half (44 per cent) of the 416 UK middle market business leaders (defined as companies with a turnover between £10m and £750m or financial institutions with assets under management of £200m to £7.5bn) questioned are unfamiliar with ESG.
The research comes as the UK Government prepares to publish findings from a consultation launched earlier this year proposing mandatory ESG reporting in line with the Task Force on Climate-related Financial Disclosure (TCFD). The new rules, expected to come into force from 2022, will make ESG reporting mandatory for all private UK companies and LLPs with more than 500 employees and turnover greater than £500m, along with all publicly quoted UK companies.
Over half the business leaders familiar with ESG (56 per cent) are attempting or have attempted to measure the impact of their ESG programme*. However, over three fifths of businesses who have an ESG strategy in place, the range of standards and frameworks that these businesses are using is extensive and difficult to navigate – creating a complex and inconsistent picture when comparing what organisations say about themselves.
Mark Taylor, regional managing partner at RSM UK, said: ‘ESG is about responsible business. Being out of tune with the net zero carbon agenda and social responsibility is not a viable option. It’s now a clear business imperative as reticence or inactivity in this space could have very real impacts on future growth, as customers, employees, investors and other key stakeholders increasingly demand strong ESG credentials.
‘However, the whole area is complicated and covers a wide range of issues. It’s difficult to define, difficult to know how best to engage and sometimes difficult to measure, despite there being no lack of standards. In fact, the number of different frameworks across the globe actually adds to the complexity as businesses can effectively pick and choose aspects which they report on making benchmarking across organisations very difficult. Without a clear, unified approach to standards, it is easy for businesses to be in the dark on what to focus on and how best to measure impact.
‘As the powerhouse of the UK economy, middle market businesses have a real opportunity to embrace the key principals of ESG to strengthen their organisations and make a real difference to climate change and how business contributes to society. Oversight bodies and government need to play their part by providing the clear guidance business needs in order to most effectively and usefully report on progress.’
The survey was the fourth in The Real Economy series of topical quarterly surveys focusing on the middle market as the powerhouse of the UK economy. The Real Economy is the first authoritative source of economic data from this crucial area of the UK business market, sharing insight and perspective for the wider economy. /Ends
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Notes to editor
*56 per cent attempting/attempted to measure the impact of their ESG programme; 24 per cent are not making any attempt to measure it; and 20 per cent are unsure if they’re measuring it or not.
Further information and a copy of the report will be available upon request from 19 October.
Survey: The research was carried out by The Harris Poll, who surveyed 416 senior executives from UK middle market businesses; defined as companies with a turnover between £10m and £750m or financial institutions with assets under management of £200m to £7.5bn.
Data for this survey was collected between 8 – 28 July 2021. Information was collected online or via telephone from 416 executives meeting the set criteria. All individuals qualified as executive level decision makers working across all regions and a broad range of industries. Responses have been weighted to ensure a true representation of the UK economy.
Chart percentages may not equal 100 per cent due to rounding.
Some findings are based on responses from the number of businesses that had a level of familiarity, so the base is smaller at 234 senior leaders or 129 that use a reporting standard for external reporting.
RSM is a leading audit, tax and consulting firm to the middle market with 3,650 partners and staff operating from 32 locations throughout the UK. For the year ending 31 March 2020, RSM generated revenues of £356m. RSM UK is a member firm of RSM International - the sixth largest network of audit, tax and consulting firms globally. The network spans more than 120 countries, 820 offices and 48,000 people, with a fee income of $6.3bn