How sustainability and ESG went from a trend to mission critical

In the reshaped American and global workplace, employee wellbeing and satisfaction is essential for effective day-to-day business as well as long-term growth. Beyond attracting talent in a tight labor market, many organizations are adopting sustainability and ESG initiatives to improve overall employee conditions, supporting health and productivity.

In fact, 61% of leaders say addressing employee health and overall wellbeing is critical to the success of their organizations. Fifty-eight percent believe in addressing economic impact, including fair wages, and the vast majority (87%) of leaders support and report diversity in their workplace.

Our recent EY Global Reporting and Institutional Investor Survey highlighted the continued importance of sustainability and ESG strategies and reporting to the investment community. As investors now demand greater transparency from public companies, the regulatory landscape evolves and the SEC proposal for climate-related disclosures for public companies makes reporting more stringent, more organizations are seeing ESG and sustainability as a way to demonstrate commitment and enhance reputation beyond simply financial performance.

Almost half of leaders (48%) reported a greater priority for, and focus on, measurement protocols and reporting standards. If the proposal becomes finalized in the coming year, 84% of executives also say their organizations are prepared to act, leaving one in six leaders indicating their businesses are not prepared for enhanced reporting requirements, or at present, that remains to be determined.

Sustainability and ESG initiatives are becoming a central strategy to building long-term value. Organizations are both investing in the structural changes necessary to drive sustainability priorities and also becoming aware of the impact – both positive and negative – that sustainability and ESG performance can have on their businesses. Fifty-four percent of leaders now see environmental issues, and 52% view technology, as emerging sustainability and ESG risks as the landscape evolves and initiatives gain more visible momentum.

To help focus management efforts, changes are afoot within organizational structures. Just a few short years ago the role of chief sustainability officers (CSOs) was far less widespread than in modern organizations. Today 81% of survey respondents say they have a CSO or equivalent position within their leadership hierarchy, focused on developing the sustainability strategies critical to achieving long-term business goals. Just over a third of those CSOs have a direct line of reporting to the CEO of their business, with 25% reporting into other executive leaders, demonstrating the commitment to, and integration of, ESG strategy at the very highest levels of organizations. Board involvement in ESG and sustainability matters has also gained momentum, with nine out of 10 executives reporting board oversight of their organizations’ sustainability and ESG agendas in an effort to track performance against goals and provide greater transparency for investors.

Aside from internal structures, collaboration is also a key strategy for many. Between 86% and 91% of C-suite leaders report their organizations are greenlighting and boosting both industry and public-private ESG and sustainability collaborations. Expect this to continue into 2023 and beyond.