Nearly half of business leaders of companies with a turnover between £10m and £750m are not familiar with environmental, social, governance (ESG) reporting rules
The research by RSM found that out of the 55% of business leaders who were aware of environmental, social, governance almost half of those are not making any attempt to measure the potential impact that their goals might have on the environment or society.
However, over three-fifths of businesses with an ESG strategy in place are ‘using an extensive and difficult to navigate framework which RSM describes as ‘complex and inconsistent’.
The firm states that this is because there are multiple different frameworks across the globe and companies can ‘effectively pick and choose aspects which they report on’ which makes benchmarking organisations ‘extremely difficult’.
The research comes as the UK government prepares to publish its 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.
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.
‘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’.
The firm calls for the government to ‘play their part’ to provide a clear, unified approach to standards that will give businesses guidance to ‘effectively and usefully report on progress.’
ESG has been a hot topic across the last year especially with bigger businesses starting to embrace environmental, social, and governance reporting by their finance teams.
According to PwC’s 2021 Annual Corporate Directors Survey, 64% of businesses stated that ESG is linked to their company’s strategy, compared to just 49% in 2020.