Sustainability is now firmly on the agenda for management teams of businesses of all sizes, yet only a minority have a clear understanding of how they are performing or how Environmental, Social and Governance (ESG) metrics might apply to them, according to a new survey from banking giant HSBC.

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The new survey – ‘Navigator: Now, next and how’ – explores the views of over 9,100 companies in 35 countries and territories. It shows that almost all businesses (96 per cent) are feeling pressure to become more environmentally and ethically sustainable, but many are struggling with barriers such as their ability to finance change (35 per cent) and to free up resources to implement that change (31 per cent).  

 

Measurement challenges could limit progress 

 

Over a quarter (27 per cent) of businesses say they are frustrated by a lack of consistent ESG measurement criteria, meaning they aren’t sure what to focus on. Moreover, there’s a consistent gap of up to 10 percentage points between ESG indicators companies do identify as relevant and those they actually measure. 

 

“People want to know the values of the businesses they buy from and market pressures mean every business must demonstrate it has a positive effect on the communities in which it operates. But translating sustainability ambitions into measurable practices isn’t easy,” admitted Barry O’Byrne, CEO of HSBC Global Commercial Banking. “You don’t have to look far to find ESG guidance from organisations ranging from the UN to stock exchanges,” he continued, yet added that “Identifying which guidance might apply to your business is a challenge for management teams, and our Navigator findings show that progress towards common reporting frameworks would clearly be welcomed.” 

 

While 26 per cent of businesses want to become more sustainable to improve their efficiency, and 23 per cent think it will help boost sales, just 15 per cent  are measuring their energy use and only eight per cent their carbon emissions. In terms of social and governance metrics, 13 per cent say they measure the fair treatment of employees and 14 per cent track the effectiveness of their anti-bribery and corruption controls.

 

Pressure to do more on sustainability

 

Pressure to do more on sustainability is coming from multiple sources – including competitors, investors and employees – according to the survey. Businesses in Indonesia (47 per cent), the UAE (46 per cent), Australia (43 per cent), Turkey (43 per cent), South Africa (41 per cent) and Singapore (40 per cent) say they feel the most pressure from their governments, while peers in Argentina (49 per cent), Russia (46 per cent), Brazil (45 per cent), Poland (45 per cent), South Korea (44 per cent) and Thailand (41 per cent) say it’s their customers that are leading the call for change.

 

Over the next five years, one-third of businesses expect to invest more in technology, innovation and infrastructure to improve sustainable production. The focus for 31 per cent will be to promote employee health, well-being and safety, while for 29 per cent it is to reduce waste generation and improve energy efficiency. 

 

A plethora of ESG guidelines exist, including guidance from a number of stock exchanges and ESG reporting frameworks from standard-setting bodies such as the Sustainability Accounting Standards Board (SASB). The UN provides Principles for Responsible Investment, although there is a spectrum of different impacts and activities that companies might want to measure. 

 

HSBC publishes an Environmental, Social and Governance Update on an annual basis. The firm said that in 2020, publication will be alongside its Annual Report and Accounts.