Despite 2023 being the planet’s warmest year on record, businesses do not believe that wider industry is taking environment, social and governance (ESG) issues entirely seriously.

GlobalData's ESG Sentiments Polls Q4 2023 survey, carried out across the company's network of B2B websites, found that 54% of respondents believe that “For most companies, ESG is just a marketing exercise”, with this figure having been rising continuously from a recent low of 22% in Q3 2022.

“When we take a step back and consider that the purpose of most businesses is to generate profit and expand their market share, it is unsurprising that many have latched onto the idea of using ESG as a marketing opportunity,” commented GlobalData’s thematic intelligence analyst Amalia Maiden.

“However, when companies publish ESG manifestos that lack integrity or do not consider sustainability goals as concrete objectives, it ultimately leads to a breakdown in trust from employees and customers.”

Regulators have been working hard to try and reduce the prevalence of greenwashing across the board. In 2023, the UK finalised its Sustainability Disclosure Regulation, which governs the labelling and disclosure of sustainability-related investment funds, while the EU opened for consultation the Sustainable Finance Disclosure Regulation, which is aimed at reducing greenwashing and providing greater transparency in the investment market.

Of the evolving regulation surrounding greenwashing, Maiden added: “Companies will have to prove their credibility under independent assessment if they choose to use sustainable terms. While this is just the start, it shows the promise of government action through regulation to reduce greenwashing and increase corporate accountability."

GlobalData's survey also showed that ESG is not perceived to be a major short-term concern for businesses, with macroeconomic factors such as inflation and geopolitics themes viewed as more imminent threats. While 46% of respondents ranked inflation as most likely to impact their business in the next 12 months, ESG was just 4%.

“Unfortunately, it is simple short-termism,” explained Maiden. “ESG is not as strong an imminent threat to businesses as high inflation or geopolitics. However, climate change and environmental destruction are important factors behind rising geopolitical tensions, increasing costs, and diminishing supplies of essential resources, impacting all businesses.”

Of how businesses should approach ESG as part of their strategies, Maiden added: “Companies must first consider the key polluting and environmentally destructive aspects of their specific business operations and the areas of their business structure that are at risk from the future disruption of climate change and the inevitable renewable transition will bring.

“A good place to start is to calculate annual greenhouse gas emissions, a mandatory activity for many large corporations, and to benchmark this against industry standards to identify key areas of concern and set targets for emissions reduction across the business that focus on the company’s specific structure and problems. However, for all companies, choosing to purchase electricity from renewable sources will help drastically reduce their Scope 2 emissions.”