ESG Strategies Deliver Most Value in Environmental Goals

In corporate America, the growing focus on achieving environmental and social goals has brought about more attention to companies’ ESG strategies. New research by The Conference Board reveals that companies have made more progress in effectively linking their ESG strategy to environmental goals than economic and social goals.

The report reveals that 54% of surveyed executives say their ESG efforts are well-aligned with broader environmental objectives, such as reducing emissions. This is likely due to greater clarity and consensus around environmental targets, including how to measure their progress.

Only 41% say their ESG plans are well-aligned with broader socioeconomic goals—for example, reducing inequality. 33% believe this is the case regarding their social goals, such as increasing diversity. This limited alignment highlights the complexity of integrating ESG factors into business operations while also aiming to benefit society.

“When formulating ESG strategies, corporate leaders face significant challenges both inside and outside company walls. Externally, they must steer their organizations through economic uncertainty, geopolitical strife, and the politicization of ESG issues. Internally, they face financial, governance, and communication hurdles in integrating ESG into their core operations. Given these ever-evolving circumstances, leaders should regularly reassess—and revitalize—their ESG strategies to ensure their continued relevancy,” said Andrew Jones, author of the report and Senior Researcher at The Conference Board. 

Additional findings include:

The State of Corporate ESG Strategies

 Less than half of respondents say their ESG strategies are well-integrated into their firms’ activities:

• 42% of surveyed executives believe ESG is well-integrated into their company’s activities.
• 50% say ESG is only somewhat integrated—indicating room for improvement.
• 8% consider ESG to not be integrated at all.

Multiple obstacles may be impeding businesses from further advancing their ESG strategies:

• Growing ESG backlash: The politicization of ESG is not a passing fad. 61% of surveyed companies expect it to persist or intensify over the next two years.
• Evolving regulatory landscape: Only 24% say they are ready for upcoming sustainability reporting requirements.
• Lack of a clear ROI: There is an overall lack of understanding on how to measure the ROI of ESG investments, including the necessary metrics, methodology, and tools to do so.

The State of Sustainability Disclosure: Climate Risk, Climate Change Policy, and Emissions

There’s a wide gap between S&P 500 and Russell 3000 companies when it comes to disclosing GHG emissions, climate risk, and climate change policy:

• Total GHG emissions: 92% of S&P 500 companies disclosed such information in 2023, compared to 53% of the Russell 3000.
• Climate change risk: 84% of the S&P 500, compared to 53% of the Russell 3000.
• Climate change policy: 97% of the S&P 500, compared to 74% of the Russell 3000.

“Rather than waiting for international agreements and regulations to define their approach, companies should proactively develop and enact their own climate and environmental targets. By setting goals that align with their business strategy and societal objectives, they can meet or exceed stakeholders’ expectations—enhancing their reputation and driving financial value,” said Nathalie Risse, author of the report and Senior Researcher at The Conference Board. 

The State of Public-Private Sector Collaborations 

Most executives view public-private collaboration on sustainability-related initiatives as fair—indicating room for progress:

• Excellent or very good: 13% of respondents say collaboration between the public and private sectors is strong on initiatives such as the low-carbon transition and biodiversity protection.
• Good: 18% say there is increasing collaboration and effectiveness.
• Fair: 54% say they have occasional partnerships, which are sometimes disjointed or unproductive.
• Poor: 15% say such partnerships are meaningless or absent.

When it comes to protecting biodiversity, there’s an opportunity for substantially more collaboration between companies:

• Excellent or very good: 5% of respondents say collaboration within the private sector is robust and consistent.
• Good: 16% say there is increasing collaboration and effectiveness.
• Fair: 47% say they have occasional partnerships, but often lack depth or consistency.
• Poor: 32% say such partnerships are rare or nonexistent.

“There’s a powerful incentive for companies to view biodiversity as a key business issue: according to the OECD, more than half the world’s total GDP is moderately or highly dependent on nature and ecosystem services. Moreover, for companies that heavily rely on biodiversity, protecting it can mitigate direct risks such as resource scarcity, supply chain disruptions, and the irreversible loss of resources or services,” said Matthew Morton, Partner at Weil, Gotshal & Manges LLP.

The findings come from the first two reports of a four-part series produced in collaboration with the international law firm Weil, Gotshal & Manges LLP. The first report focuses on how companies can further refine their ESG strategies; the second report addresses how companies can enhance their environmental efforts to reach their goals. Informing the insights are: 1) public disclosure data; 2) the results of polls that gauged around 40 – 50 sustainability executives; and 3) a series of roundtable discussions on setting and implementing ESG strategies.