Five Trends Defining the Future ESG Agenda for Companies

Should companies and business leaders rethink their current strategy to address ongoing ESG and sustainability trends?

Explore some of the central challenges defining the future ESG and sustainability agenda for companies and organisations.

ESG and sustainability continue to evolve. Distilling such a dynamic landscape is challenging. That said, we see the following five ongoing trends as central for companies and business leaders over the following years:

1. Expansion of ESG laws

Corporate ESG reporting requirements are poised for extensive expansion. New climate laws include annual disclosure requirements for greenhouse gas emissions, incorporating Scope 3 emissions. Reporting is broadening beyond climate change to encompass human rights, as seen in new mandates such as the European Union's Corporate Sustainability Due Diligence Directive.

2. New sustainability reporting requirements

New laws and legislation create extensive sustainability reporting requirements for companies – especially if they are active in several jurisdictions. They can influence corporate strategies and operations significantly. Companies may want to pay close attention to developing frameworks that focus on biodiversity, nature, global plastic waste, and Diversity, Equity, and Inclusion (DEI) to be ahead of the curve.

3. ESG integration into supply chains

Driven by various factors, companies are increasingly incorporating their suppliers into their ESG initiatives. Innovations such as new information technology platforms facilitate enhanced interactivity and collaboration between companies and suppliers, enabling the development of standard reporting metrics and fostering robust ESG ecosystems.

4. Social challenges and ESG boundaries

Companies are also increasingly focused on social challenges that are not directly related to environmental considerations. In an era marked by societal polarisation, businesses will find themselves intricately entangled in defining the boundaries of ESG, necessitating businesses to navigate a complex array of social considerations.

5. Towards climate positivity

There is a growing demand among consumers and customers in many markets for companies to look beyond carbon neutral. The next step is achieving a 'Climate Positive' status where companies actively contribute to global environmental betterment through various sustainable initiatives. Integrating provable use of renewable energy will be the next natural step for many companies.

Rethinking corporate strategy and action

The trends above are only some of the ways ESG issues impact companies and, in turn, corporate strategies. An overarching theme we meet when working with clients is that ESG challenges have transitioned from isolated, issue-specific responses to integral components of a company’s fundamental purpose and values.

Corporate reactions to ESG matters must evolve beyond engagement with internal and external stakeholders to include optimal selection and strategic management of significant ESG issues pertinent to the business.

To adapt to these transformations, companies can take a range of actions, including:

• Conducting strategic forecasts for emerging ESG issues and trends that may positively or negatively affect brands, markets, and operations. 

• Ensuring business executives and leaders understand and internalise ESG and its values.

• Preparing strategies and initiatives goals with clear metrics for significant ESG challenges.

• Identifying and communicating clearly on central ESG issues, both internally and externally.

• Equipping employees with the tools and knowledge to address ESG issues and support ESG initiatives.

• Giving internal and external stakeholders ownership of ESG, including when formulating ESG strategies and providing training that creates an ESG mindset throughout the organisation.

Given the current struggles of government and other organisations to resolve societal conflicts, companies may often find themselves in the ESG driver’s seat. It is a position with increased opportunities – and perhaps even responsibility -  to evolve ESG and sustainability initiatives to support the continued growth and well-being of their employees, stakeholders, and surrounding society – and, thereby, their businesses.