To put it bluntly, 76% of consumers will stop buying your products if you don’t care about the environment, your employees, or the communities you operate in. Even more telling, ESG institutional investments are expected to increase by 84% reaching $33.9 trillion by 2026. This is a clear sign of changing business environments.
But are companies really making an impact or just going through the motions? The answer to that question will reshape the impact of corporate sustainability.
The Great Transformation: Beyond the Paperwork
The days of sustainability reporting consisting solely of an annual glossy report are long gone. We are entering a new period in which stakeholders expect proof.
Evidence of that is clear. 84% of S&P 500 companies identified climate change as a risk factor in 2024, up from 67% in 2021. That’s not an incremental change. That’s a corporate thinking revolution.
It is about creating value that stakeholders will perceive, quantify, and trust, and it is about survival. Corporate sustainability is not just about reputation management anymore. It’s time to create value.
What's Driving This Shift
Companies face three powerful forces that are pushing them from reporting to real action.
Regulatory Momentum: As of January 1, 2024, the EU's Corporate Sustainability Reporting Directive is in full effect. Companies are compelled to disclose the societal and environmental impacts of their operations. Mandatory disclosures will be unprecedented in scale.
Investor Pressure: Only 29% of investors believe that companies’ reporting sufficiently integrates the business impact of ESG. Investors are fatigued by vague ESG proposals and are looking for concrete evidence of actual ESG impact.
Consumer Expectations: Accountability is a purchase criterion for the modern consumer. People research companies before buying, and are willing to switch brands if a company fails to meet their expectations.
The Data Quality Challenge
More than half (57%) of companies cite data quality as their top challenge with ESG data. Let’s be real. You can’t manage what you can’t measure, and you can’t report what you can’t track.
More companies are realizing that enhanced sustainability reporting is a signal that the company needs infrastructure and systems. Dedicated teams are required to meet the strategic and technical reporting needs.
Forward-thinking businesses are hiring Chief Sustainability Officers and investing in cross-functional teams to establish this foundation. They are integrating technology that captures, verifies, and reports sustainability data in a detailed and accountable manner.
Developments in Double Materiality
2025 will allow specific organizations to report under the CSRD for the first time and capture reports that practice "double materiality." This focuses on the financial impact and the social and environmental impact. This is a groundbreaking development.
Double materiality is an approach that can examine a problem in two ways. In the case of climate change, businesses need to ask how it will impact their operations and how their operations impact the climate. Each of these questions is equally important, and both need to be interrogated thoroughly.
This SA approach, more than any other, builds holistic thinking in an organization about the business and ESG trends. It dismantles the silos in the organization. It connects the environmental and financial streams of business operations. It ingrained the accountability of sustainability in every employee, and it is no longer the sole domain of the sustainability team.
The Technology Revolution
Technological advancements positively impact how businesses manage corporate sustainability. The role of artificial intelligence, which analyzes vast data sets, is significant. Blockchains provide the needed integrity, and the clouds enable monitoring to the second.
Responsible use of AI is expected to be in 21% of company sustainability reports in 2024. This will change quickly. Reporting improvements are one thing, but technology is enabling substantial operational improvements as well.
Think of smart supply chains that track the carbon footprint of every component. Imagine self-optimizing energy systems that minimize harmful impacts. Consider advanced procurement systems that automatically identify sustainability threats.
Real Impact
Real ESG impact is not only in the numbers. It is the actual impact:
Measurable Impact: To report year-over-year reduction in carbon emissions, declining water usage, and diversion of waste is progress.
Supply Chain Changes: To have force, ethically defensible suppliers, and have human rights upheld through to the customer is a real impact.
Community Impact: Creating jobs, funding education, and improving infrastructure and, more importantly, lives is a genuine impact.
Final Thoughts
Is the new goal position your organization to make a real impact in the environmental and social arenas? The needed tools and partnerships exist.
Earthood is in a position to help you fill the gap that is left with your sustainability reporting. We know that every organization is in a different position along the corporate sustainability continuum.
It is time to stop checking sustainability. Your reputation and impact will bring admiration from your stakeholders.