BENGALURU: The Infosys ESG Radar 2022 report has captured how sustainability has evolved into a boardroom agenda and how it is driving measurable outcomes.
The report, produced by the Infosys Knowledge Institute, found that a 10-percentage point increase in ESG (environmental, social, governance) spending would grow profits by 1 percentage point. The report's insights came from an online survey of 2,500 business executives across industries, and across the US, UK, France, Germany, the Nordics, Australia, New Zealand, China, and India.
A robust ESG framework and leadership strategy, the report said, will build long term business resilience and has the potential to increase revenue growth and profitability by 2 percentage points.
Krish Shankar, EVP and group HR head at Infosys, said a concerted effort by the chief diversity officer (CDO), chief sustainability officer (CSO), and ESG committee on the board is needed.
“An ESG focus at the leadership and at the board level really leads to a much bigger financial return. From our survey, what we see is that the biggest results come from doing E, S and G -- some companies have done E well, but they don’t give as good results as when you also do S and G,” he said.
Only about a quarter (27%) of those surveyed said their company has all three components in place. The survey data analysis also found that the C-suite and top executive ranks were the most neglected areas for ESG changes.
Just 19% of respondents say their company ties executive compensation to ESG goals, and just 30% say their firms place responsibility for ESG with the C-suite.
Shankar said ESG as a workforce strategy is key to attracting and retaining talent as higher ESG scores translate into improving employee experience. “Employees are starting to look at ESG as one of the elements of the value proposition of a company,” he said.
The research found that almost all companies are interested in aligning their ESG goals with their supply chain, especially as more companies are expected to account for their scope-3 greenhouse gas emissions, where the company is indirectly associated for, up and down its value chain. However, less than one-third share ESG expectations or requirements for suppliers.
Only 16% say they renegotiate contracts based on ESG data from those in the supply chain -- indicating a clear need for more leadership in the supply chain and incentives to share ESG data, whether it’s meeting new contract requirements or making themselves more appealing to others in the supply chain.
The four top changes companies made to meet their ESG goals were all related to products and services. More than half (56%) say their company has changed its product design to extend lifespan or increase circularity.
The other top actions were introducing new products with a greater positive ESG impact (49%), changing product sourcing to reduce societal impact (44%), and phasing out products or services that have a negative ESG impact (42%).
