Firms urged to embrace ESG after survey reveals lack of awareness

Mid-market business leaders in the UK are showing a lack of familiarity with the key area of environmental, social and governance (ESG), potentially stifling growth, according to a new report.

Almost half (44 per cent) of the 416 UK middle-market business leaders (defined as companies with a turnover of between £10 million and £750m or financial institutions with assets under management of £200m to £7.5 billion) questioned are unfamiliar with ESG, according to audit, tax and consulting firm RSM UK.

For those who are, nearly a quarter are not making any attempt to measure the potential impact their ESG goals might have on the environment or society, and in turn the benefits a robust approach to the subject could have on business and communities.

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Middle-market firms can embrace ESG to make a real difference to climate change, says RSM (image - activist Greta Thunberg speaks at a large-scale climate strike march last month). Picture: Maja Hitij/Getty Images.

RSM said the research comes as the UK Government prepares to publish findings from a consultation launched earlier this year proposing mandatory ESG reporting in line with the Task Force on Climate-related Financial Disclosure.

The new rules, expected to come into force from 2022, will make ESG reporting mandatory for all private UK companies and limited liability partnerships with more than 500 employees and turnover greater than £500m, along with all publicly quoted UK companies, the professional services firm added.

It also stated that more than half the business leaders familiar with ESG are attempting or have attempted to measure the impact of their programme in this area. However, for more than three fifths of businesses who have an ESG strategy in place, the range of standards and frameworks they are using is extensive and difficult to navigate.

Alex Tait, RSM’s regional managing partner for Scotland and Northern Ireland, said: “ESG is about responsible business. Being out of tune with the net zero carbon agenda and social responsibility is not a viable option. It’s now a clear business imperative, as reticence or inactivity in this space could have very real impacts on future growth, as customers, employees, investors and other key stakeholders increasingly demand strong ESG credentials.

“However, the whole area is complicated and covers a wide range of issues. As the powerhouse of the UK economy, middle-market businesses have a real opportunity to embrace the key principals of ESG to strengthen their organisations and make a real difference to climate change and how business contributes to society."

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