Rift on ESG execution emerges between managers and C-suite

Gaps between the sustainability expectations of executives and their managers are widening, with the C-suite more positive on progress for every sustainability issue than lower-ranking leaders. In particular, managers are concerned that their executives have not translated high-level goals into actual operational plans, and that sufficient internal funding for sustainability has not been made available.

As residents around the world become ever-more wary of the impacts of climate change, recent research suggests that temperatures in board rooms are also rising. Discussions on environmental, social and governance (ESG) matters are coming to a head, as it becomes apparent that many firms have been good at talking the walk, but are failing to walk the walk on climate change.

In particular, this has seen the rise of a growing rift between C-suite executives, and frontline managers, who see their company’s sustainability efforts from distinctly different angles. Illustrating this, a new report from global consultancy ERM has found that while the majority of executives think their firm is making good progress on ESG issues, the same is not true for their managers.

Collaborating with market research agency Kadence, ERM surveyed 1,475 global respondents, including 390 C-suite and board members and 1,085 managers across functions and company sizes. Respondents were based across Europe, North America, South America, Asia-Pacific, Africa and the Middle East – with the results showing that questions remain over crucial business functions for integrating climate, nature and social goals into business operations.

On average across all ESG fields (from decarbonisation to biodiversity and social issues), 50% of respondents said their firms had made good progress – rating it four-out-of-five or higher. Not all leaders feel the same, though. That half-way threshold is breached thanks to a much more optimistic outlook from executives than managers – at 56% saying their firm was making good progress, compared to 48% respectively.

The views of the C-suite skewed a number of specific fields to a more-positive average, too. While 47% of all respondents said their firm was doing good work on the climate and decarbonisation, that consisted of 54% of executives, and just 45% of managers. There was also a nine-point gap between the levels of leadership for biodiversity work, and a six-point difference when it came to equity and social issues. In each case, the C-suite was more positive from a high-level perspective, while managers were less convinced with progress on the ground.

Improving what may or may not being going wrong in a company’s ESG efforts will depend on how well this gap can be bridged. But at present, there also seems to be a clear divorce between what the C-suite and managers see as the leading challenges they need to address.

While 39% of leaders of all levels are agreed that their companies would enjoy policy incentives (predictably including tax breaks) for doing the bare minimum to avert a global extinction event, they are singing from different song-sheets when it comes to the mechanics of their own organisation. For example, the most significant gap comes with 37% of managers suggesting their firm’s goals have not been translated into operational plans, or working targets. But C-suites seem less inclined to worry about that, with only 28% of executives suggesting they might have found better ways to plug high-end pledges into the functions of everyday business.

Commenting on the findings, Sabine Hoefnagel, global leader of sustainability and risk at ERM, said, “The sustainability transformation is accelerating, and companies have responded with ambitious goals and roadmaps. Yet the integration of sustainability goals into business plans and operations is not moving fast enough for companies to effectively navigate this transition and seize its commercial potential. In the long term, those companies that embrace the challenge and find ways to accelerate progress on sustainability within their operations will be well-positioned to reap the rewards of enhanced commercial opportunities and business resilience.”