ESG is attracting more attention from businesses, consumers and regulators, and is increasingly regarded as a key area of risk for business executives globally. However, along with growing social pressure, businesses are now also facing a growing regulatory burden in this sphere. For example, companies in the EU have to comply with a host of new ESG regulations, including the Corporate Sustainability Reporting Directive, Sustainable Finance Disclosure Regulation and the EU Taxonomy for Sustainable Activities, with further initiatives being discussed publicly. As a result, ESG risks are quickly rising up boardroom agendas as executives are forced to take bold steps across all three areas that ESG encompasses.
Our data shows how the perception of ESG risk has developed over time with 22% of global business leaders ranking ESG as the number one business risk they face in 2023, an increase from 19% in 2022. 61% of executives ranked ESG risk in their top three most concerning business risks, with only employer risk receiving a higher percentage of votes (63%).
ESG regulation is fast-paced and continually evolving, so much so that we are now seeing significant variations in regulations between countries, and even within countries. As business efforts come under growing scrutiny, the lack of a clear measure and shifting public and governmental viewpoints present an increasingly difficult path for businesses, particularly for multinational companies operating in multiple jurisdictions.
There is no one size fits all approach to dealing with ESG regulation, as there is no overarching world legislation or international law for businesses to fall back on. This has a significant impact on multinational businesses and can be seen as a barrier to international expansion by small and medium-sized businesses.”