ESG as important as profit to three-quarters of UK CEOs

31 January 2023 3 min. read

C-suites and financiers consider ESG vital for the survival of their businesses. A new poll shows that three-quarters of UK CEOs have brought the topic to the top of their agenda.

As the global economy heads into recession, it seemed that investors and executives were about to clash on environmental, social and governance spending. While investors said they were increasingly likely to divest from companies which did not take sustainability budgets seriously, one-third of executives said they were considering cutting ESG spending, as they sought to consolidate their bottom lines.

However, a new study from ECI Partners suggests that in the UK, at least, CEOs now see ESG as of equal importance to financial performance. In the autumn of 2022, the private equity firm spoke to over 500 CEOs in the UK, and found that social purpose has also significantly progressed up leaders’ agendas. A 74% majority now say that sustainability is at the top of their agenda, while only 2% say it doesn’t inform their strategy at all – tumbling from 15% in 2021.

To what extent do you view ESG as important to your organisation against factors like financial performance

Stephen Roberts, Partner at ECI, remarked, “The role of ESG and social purpose within businesses is increasingly important. CEOs want to improve the world in which they operate, and they see ESG – and more specifically, social purpose – as a necessity for the growth and success of a business.”

The increasing importance of ESG on the corporate agenda is illustrated by firms committing to adding new talent to their team. Most demonstratively, 28% of leaders said they wanted to appoint a Chief Sustainability Officer in the next 12 months – a role that until recently had been relatively rare in UK board rooms.

This is not only important due to the attitudes of investors, or the environmental impact firms have, either. Amid the war for talent, being seen as proactive on ESG is crucial for attracting and retaining staff – as employees are increasingly looking at how employers to step up when it comes to their ESG strategy.

How important is social purpose by region

Roberts added, “Progress in this area not only helps with the employee value proposition, it is also attractive for new customers and investors. Furthermore, there are clear regulatory drivers to enhance sustainability and governance, and there is plenty of evidence that creating a diverse and inclusive business leads to better growth prospects.”

Across the UK, most regions now believe that working to support social purpose is vital for businesses. This was most intensely felt in Wales, where 71% of employees identified it as a top concern – while more than 60% said as much in Scotland and the west Midlands. And in the UK’s largest local economy of Greater London, a 53% majority also agreed.

In response to this, a growing number of companies are embedding their environmental, social and governance ambitions into their rewards and benefits. This could rapidly boost a firm’s efforts to become more sustainable, and help show prospective employees that it is doing its part to positively impact the world around it.