‘ESG can be doubly daunting for a company that hasn’t focused on it for more than a year or two,’ says Randall Hopkins, global head of ESG solutions at Nasdaq.
Although he notes that ‘ESG has gone from being a stand-alone issue to very much being the articulation of the core value drivers for companies’, a majority of companies are still in the early stages of their sustainability journey.
In fact, the Nasdaq 2023 ESG and Climate Survey shows that, globally, 45 percent of companies have been tackling ESG and sustainability for less than three years. Just 9 percent have been doing so for more than five years.
The survey was carried out on behalf of Nasdaq by independent research firm Verdantix, undertaking a series of interviews with 100 executives in ESG/sustainability, real estate operations and finance roles across North America and Europe. It finds that European companies are typically further along in their journey than their North American counterparts: 60 percent of European firms surveyed have been working on ESG for at least three years, compared with just 50 percent of those in North America.
The ESG and IR skillset
A sign of sustainability maturity tends to be a larger ESG team, according to Nasdaq’s research. It finds that almost 60 percent of companies have six or more dedicated individuals in the ESG and sustainability working group, with larger teams typically indicating a more mature approach.
Still, almost half (47 percent) of the most senior members on ESG teams are voluntarily taking on that responsibility in addition to their existing role. This compares with just 14 percent who are hired as dedicated members of the team.
Nasdaq also notes that the ESG and sustainability team is most likely to partner with the finance function – and Hopkins points to the IR profession as having a particularly compatible skillset. In addition to its position internally – already curating information from across the company – and externally in its relationships with key ESG stakeholders in the investment community, IR professionals communicate in a way that complements the sustainability story.
‘One thing we’re noticing is the need for companies to have different styles of ESG messaging for different audiences,’ Hopkins says. ‘That is something IR understands. Know your audience is a lesson IR learned many moons ago, but it bears repeating because when we talk about sustainability goals, science-based targets or supply chains, IR can articulate those themes with agility.’
This alignment with the fast-growing sustainability landscape only emphasizes the importance of IR, Hopkins continues. As such, he says: ‘I have great optimism for the IRO having a seat at the table for the long term.’
Moving beyond questionnaire fatigue
While all companies surveyed are working on ESG to some degree, Nasdaq finds that nearly two fifths (38 percent) are missing a trick by failing to actively participate in ESG ratings and rankings.
Such ratings and rankings have arguably grown in importance over recent years. The burden on companies to provide data for questionnaires that can run into hundreds of questions is ‘immense,’ Hopkins says. While the burden is great, however, companies can both avoid risk and expose opportunities by engaging with third-party raters and rankers.
This expresses itself in earning more business from customers, retaining more talent within the workforce and achieving a lower cost of capital by attracting long-term investors. All these reasons are amplified in challenging macroeconomic environments.
Creating an efficient process to gather, review and approve relevant facts and figures from across the company is essential to managing such surveys successfully, Hopkins argues. ‘Taking the sand out of those gears is how we can ease the data and reporting challenges of this work,’ he says.
And for him, technology is a key element in allowing companies to focus on their core value drivers rather than getting bogged down in data collection. ‘We can’t make the questionnaires shorter, but we can cross-reference them, deduplicate them, demystify them and share that work effectively with the broader enterprise,’ Hopkins says.
Boiling the ocean
These efficiencies often set apart those companies that are more mature in their sustainability journey from those that have joined more recently.
‘The companies that have had more experience learn where those shortcuts are and how to use technology to create scale, to get back to a more strategic view on ESG rather than just trying to do everything,’ Hopkins notes.
‘When you’re just starting out, you really are at risk of trying to boil the ocean and complete yet another questionnaire, yet another ESG survey before you really know which ones are going to drive the most value. Companies often ask us for advisory help with the ‘what’ in addition to the ‘how’ of ESG program management.’
For more insights from Nasdaq, read the full 2023 ESG & Climate Survey report here.
To learn more about Nasdaq ESG Solutions, get in touch here
