A survey, carried out by the legal services group DWF, revealed that half of businesses were struggling to implement strong environmental, social governance policies with 59% of respondents reporting that they have lost out on businesses as a result of their company’s environmental, social governance (ESG) commitments.

The survey of 480 senior executives across 13 countries revealed that 40% of companies found recruiting key talent difficult as their environmental, social governance policies were seen as ‘weak’ with only 35% stating they had fully considered the ethical and legal implications relating to ESG disclosure and commitments.

DWF found that many companies revealed they were playing it safe with 47% stating they will limit their disclosures to those that they believe will not create any legal issues, while almost the same number, 48%, were ‘still thinking about how to best handle environmental, social, governance disclosures from a legal perspective’.

However, 46% of stakeholders have began to increase pressure on boards on ESG matters relating to their own business with 68% of businesses stating that they are seeking professional advisors to collaborate with on best environmental, social, governance practices.

Kirsty Rogers, head of environmental, social governance, DWF, said: ‘The clear message from our survey is that companies not only understand the need to have a strategy for ESG, but that without one there are clear costs. These costs could include damage done to their business to the point of affecting their licence to operate.

‘Following COP26, it is even more clear that companies have a huge role in driving the global transition, while also improving social issues and driving progress on governance. To achieve their goals, they need a clear, ambitious, and transparent ESG strategy.”

The survey also found that a total of 43% of respondents said that in-house counsels play a lead role in setting and delivering ESG strategy, this rose to 50% in the UK.

However, 57% say in-house counsel plays only a ‘support’ or ‘minor role’ showing the growing importance of supporting counsel to businesses who want the best possible independent advice on implementing overall ESG strategy.

Suzanne Scatliffe, global sustainability director at AXA XL, a division of AXA said: ‘Boards need to be well-versed in their responsibilities and have sufficient oversight for how ESG is being managed in the companies they oversee. Sustainability shouldn’t be an adjunct to the business. We are talking about what will sustain us into the future and it’s, therefore, core to business strategy.’

Regarding external challenges faced by businesses, 55% stated that it was the lack of broad agreement on best practice, and 54% stated that it was the lack of a universal benchmarking service. Finally, 53% stated that it was the lack of a universal set of standards and regulations that caused the biggest challenge.

Joseph Bailey, senior analyst, Bloomberg Tax and Accounting said:’ ‘I’d expect more organisations to change, adopt and merge until the market settles on a uniform framework of utility. Until companies consistently adopt those frameworks it’s going to be laborious and hard to derive consistent and comparable meaning for stakeholders.’

 Croner-i Navigate provides guidance, commentary and tools for ESG reporting. See Navigate UK GAAP Accounting – ESG Reporting, our Climate related reporting Quick Link, and our Energy and carbon reporting Quick Link for a selection of these resources.