Three main challenges in corporate sustainability and how to address them

Based on sustainability trends and insights from its annual ESG Market Survey completed by 140+ stock listed companies, (part of SLR) Finch & Beak's State of ESG 2024 report outlines three main ESG challenges surfacing in today's dynamic business environment. For companies looking to create value beyond reporting, the report suggests how to get the board to strengthen its commitment to sustainability, to engage pro-actively with stakeholders, and to leverage shared tools for value chain insights, while also reflecting on the freshly released Dow Jones Sustainability Index 2023 results.

In the summer of 2023, Finch & Beak conducted its 3rd annual ESG Market Survey to understand how companies are approaching ESG ratings, reporting regulation and double materiality, the challenges they face, and the tools the companies utilise to activate a successful sustainability program. A total of 141 individuals filled out the survey, with a wide range of global professionals responsible for sustainability, investor relations, or corporate communications within their companies.

This year, the major influence from the Corporate Sustainability Reporting Directive (CSRD) has truly been a game changer. At the same time, the focus on CSRD-compliance comes with the risk of stepping deeper into the reporting trap: dedicating too many resources to reporting at the cost of generating positive impact. A strategic approach to sustainability in order to create value from the company’s efforts is therefore fundamental. Fortunately, CSRD-elements such as the double materiality assessment can contribute to building that strategy.

Key actions for creating value beyond reporting

After reviewing the outcomes from Finch & Beaks’s annual ESG Market survey, sustainability trends, and the new results from the Dow Jones Sustainability Index 2023, the report discusses three key actions to create value beyond reporting in 2024:

1. Getting the board to double down on sustainability

Even in 2023, 16% of survey participants still selected ‘convincing Board/executives of the relevance of sustainability’ as one of their main challenges for the implementation of the company’s sustainability program. Four steps can help to strengthen the position of sustainability at board level: (1) training to level up the language in the boardroom, (2) using the double materiality assessment to engage deeply, and define focus areas, (3) linking materiality to the board’s main priorities: risks & opportunities, and (4) elevating ESG from a pain point to a strategic approach.

2. Engaging stakeholders with a pro-active approach

Engaging external stakeholders was indicated by 41% of survey respondents as the biggest challenge in their double materiality assessments – yet the engagement with affected stakeholders in the due diligence process and sustainability materiality assessment is an essential part of CSRD. Three suggested steps to address in the stakeholder engagement process are: (1) select the organisation’s relevant stakeholder groups, (2) decide on the engagement strategy and set up hands-on methods, and (3) give back: show appreciation and stay accountable. Equipping the stakeholders to engage on complex sustainability issues helps to have a more meaningful discussion.

3. Leveraging shared tools for value chain insights

For the third year in a row, collecting and managing ESG data across the business emerged from the survey as the #1 challenge when it comes to the implementation of their sustainability programs. However, the main challenge is to gather insights beyond operations and along the value chain, as both ESG ratings and new regulation such as the CSRD and CSDDD are increasingly expecting companies to be transparent about and accountable for their value chain impacts.

Leveraging existing tools and frameworks such as the EcoVadis supplier assessment, and guidance from a wide range of associations and initiatives (such as TCFD, TNFD, SBTN and many more) can help companies to get better insights into their supply chain impacts. Another potent approach is working together in industry coalitions, such as Together for Sustainability in the chemical industry.

Interested in knowing more about the State of ESG 2024?

If you would like to discuss your company’s own ESG challenges, and how to accelerate your company’s performance in this context, get in touch.