ESG literacy - the one crucial thing missing from your corporate strategy
In a world increasingly attuned to sustainability, a striking disconnect persists at the helm of corporate leadership. Recent findings reveal a concerning knowledge gap in boardrooms across the globe regarding the environmental, social, and governance (ESG) agenda. This gap extends across sectors and roles, affecting everything from marketing strategies to investment advising. Crucially, it underscores the universal need for comprehensive education in ESG principles - not just for CEOs and board members but also for ESG managers who are instrumental in bridging strategy with action. The evolving legal frameworks, such as the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS), highlight this necessity, pushing for an informed leadership capable of navigating and integrating ESG into their core strategies effectively.
The boardroom disconnect
Despite the growing societal and economic pressures to prioritise sustainability, many corporate boards remain unprepared. The recent Boston Consulting Group report highlights that 68% of directors see sustainability as having little to no impact on current financial performance, and alarmingly, only 29% feel fully equipped to challenge or monitor ESG execution. Additionally, 48% of respondents indicated that sustainability knowledge or experience is minimally considered in their board's competency matrix, pointing to a broader strategic readiness issue.
Echoing these concerns, PwC’s annual Corporate Directors Survey revealed a profound lack of understanding among corporate boards regarding ESG risks and strategy. Notably, only 27% of directors reported that their boards understand ESG risks "very well," and a mere 42% reported a strong grasp on their company's overall ESG strategy, highlighting a critical gap in boardroom competence.
To ensure corporate survival amid escalating climate crises, economic uncertainties, and rising social activism, bridging the existing ESG knowledge gap becomes critical for company leadership.
The domino effect across roles
The implications of this gap reach beyond the boardroom, profoundly impacting those in operational roles and tasked with implementing sustainability initiatives. ESG managers, pivotal in translating boardroom strategies into actionable practices, face a challenge that is complex and constantly evolving.
The challenge is compounded by the novelty of the field. University courses on sustainability are only beginning to emerge, and ESG managers often rely on piecemeal learning and on-the-job experience to navigate their responsibilities, particularly as they work to align their organisations with the requirements of the CSRD and ESRS legislation.
The depth of the ESG knowledge gap also significantly impacts how companies communicate their sustainability efforts externally. Authentic and transparent communication is vital to maintaining public trust and upholding a company's reputation in a market where consumers and investors demand genuine commitment to sustainability. However, it is crucial to ensure that those responsible for crafting and disseminating the company's sustainability narrative possess a deep understanding of ESG principles. This challenge is highlighted by the World Federation of Advertisers, which found that 35% of marketing professionals admit to a growing sustainability knowledge gap, compared to 20% in 2021.
This lack of expertise not only increases the risk of greenwashing but also poses a direct threat to a company's public image. Marketing and communications professionals tasked with the vital role of effectively communicating sustainability initiatives must be equipped with accurate and comprehensive knowledge to ensure that their messaging accurately reflects the company's internal practices and commitments, safeguarding against the discrepancies that can lead to public mistrust.
The imperative of continuous ESG education
Addressing the ESG knowledge gap requires a shift towards continuous education that encompasses all levels of the organisation. For ESG managers, this education is particularly crucial. As the conduits between executive strategy and operational implementation, they must possess a deep and dynamic understanding of ESG principles to guide their organisations effectively towards sustainable practices. Continuous learning enables managers and directors across the company to make informed decisions, develop robust strategies, and communicate efforts transparently, mitigating the risk of greenwashing.
Moreover, this journey fosters a deeper understanding of the long-term financial and societal impacts of ESG, challenging the prevalent boardroom belief that sustainability does not significantly affect financial performance. With only 34% of BSG survey respondents recognising how long-term trends impact company value, the role of well-informed ESG managers, board and leadership members in navigating and educating on the complexities of sustainability becomes even more evident.
A unified approach to ESG education
Without adequately addressing the ESG knowledge gap within corporations, implementing effective and genuine sustainable practices will remain challenging. It calls for a unified and comprehensive approach to ESG education that includes CEOs, board members, and, critically, ESG managers and other employee groups. This way, companies can bridge the divide between strategy and action, fostering a culture of genuine sustainability that meets stakeholder expectations and ensures long-term resilience and success.
See how Flagship's ESG education services can empower you and your organisation to adeptly navigate the complexities of ESG, ensuring compliance with critical frameworks like CSRD and ESRS. Engage with our courses tailored for corporate leaders and ESG managers, and begin the transformative journey towards embedding sustainability into your business strategy.