A knowledge gap amongst senior management is reportedly causing a “lack of action” around ESG ambitions in the mid-market, despite “incredibly high” attention on the area, according to new research from Grant Thornton.
Nearly all (90%) of the 601 UK mid-sized businesses surveyed considered a strong ESG strategy to be a significant factor in their company’s overall value creation (92%), ability to obtain funding (91%) and attractiveness to investors (90%).
In addition, mid-market leaders “broadly agreed” that demonstrating evidence of their environmental and social impact directly affected business performance.
Three quarters of respondents said that their environmental performance directly impacts customer buying decisions (76%), that their social impact has a direct impact on talent retention and attraction (78%) and that potential ethical issues in their supply chain would pose significant reputational risk to the business (74%).
According to Grant Thornton, growing stakeholder pressure is now driving increased attention on ESG issues. Only 3% of respondents said they felt no pressure at all from stakeholders on environmental and social issues.
For the remaining 97%, however, the most pressure relating to ESG came from investors (36%), customers (34%) and competitors (33%).
Though ESG was universally considered to be a high priority, many that were surveyed were found to not be delivering on fundamental measurement and reporting, with over one third having not calculated their carbon emissions for the last year (36%).
Meanwhile, only half of the businesses surveyed were found to have set a net zero strategy (51%) or reported their carbon emissions externally (52%).
According to the firm, the “main barrier” holding back the mid-market from progressing the ESG agenda was a lack of senior management support. This was followed closely by a lack of understanding of what is required and lack of resources.
Dave Munton, head of UK markets and clients, Grant Thornton, said: “ESG reporting continues to increase in importance for all businesses as all stakeholders, from investors to employees, demand increased transparency around an organisations’ impact.
“But while the mid-market clearly recognises the critical nature of this agenda and are enthusiastic about their own efforts, these results show that many businesses lack direction and do not have a proper understanding of how and where to invest resources that will drive change.”