Chief executives across the globe are planning to put their eco initiatives on hold as fears of an impending recession grow.
A new KPMG study uncovered that of over 1,300 chief executives across the globe 86% of these CEOs believe that there will be a recession over the next 12 months. 76% of these people have already plans in place to deal with the potential economic downturn and, it seems, ESG initiatives may be among the first things to be culled as a cost-cutting measure.
In fact, the study found that around half of the CEO respondents admitted they were planning on "pausing or reconsidering their existing or planned ESG efforts in the next six months", with a third of bosses having already done so, KPMG added.
What is ESG and does it impact businesses?
ESG - stands for environmental, social and governance goals which businesses overall implement towards setting forth risks, growth opportunities and displaying transparency of the business itself.
The KPMG research revealed that CEOs aim to be pragmatic with plans to insulate their businesses from an upcoming recession. However, the study showed that one of the ways bosses aim to do this is by scaling back ESG progress.
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James Pallett, Director at Verde, says: “The most sustainable businesses should have this imbedded throughout their day to day operations and culture rather than viewing ESG as a ‘cherry on top’”.
However, ESG has become a major business imperative and as Pallett expresses shouldn’t be overlooked or taken for granted. As a matter of fact, delaying key ESG notions and aims can actually negatively affect a business to the point of decreased transparency, sustainability, resilience and more.
Sandeep Jain, Chief Financial Officer at Bank of Baroda UK, states: “While everyone recognises the importance of ESG and the necessity to tackle climate change, the reality is that the impact is in the long term while the costs are in the short term.” He adds: “So it becomes an easy decision to defer the costs unless the deadlines for analysis, disclosures and actions are mandated by regulators.”
In addition, the study shows that 50% of CEOs are pausing or reconsidering their existing or planned ESG over the next 6 months. While 34% have already done so.
Are all businesses on the same page?
Although, many CEOs and businesses are changing their strategies and perspectives on ESG, not all are on the same page.
One of the UK’s largest supermarkets is voicing its concerns and opinion on this matter: Tesco.
Tesco is aiming to halve its food waste by 2025 and states it is five years ahead of a deadline that was initially set by the United Nations as part of its Sustainable Development Goals.
That’s not all, Tesco is one of the first to express that its Executive Directors must now meet these food targets or not take part in the performance-related bonuses.
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Chief Executive Officer, Ken Murphy, says: “While I’m proud of our progress in making sure good food doesn’t go to waste, we know there’s still more work to do.”
Murphy adds: “By accelerating our target to halve food waste in our operations by 2025 and aligning executive pay performance targets to this goal, we hope to drive further transformative change.”
Global Finance Head at Bristol Laboratories, Sameer Trivedi, states: “ESG has been ignored for a very long time that’s why we are in the current crisis situation.”
Certainly, there have been diverging views on ESG and overall, on whether ESG can be upheld by businesses across the globe.
Time will tell whether these strategies on ESG will be reinforced or discarded.