ESG failure will be a critical business risk by 2030
Our new report, Looking Ahead: ESG 2030 Predictions predicts Environmental, Social, and Governance considerations (ESG) will reshape corporate Australia by 2030 with ESG failures leading to blacklisting and personal liability.
Growing regulatory pressures and stakeholder demands are the voices driving organisations to transform their business models with new ESG-centric leadership teams as mindsets shift to embedding an ESG culture. Prizes for swift adoption may include greater brand loyalty, the ability to secure capital, increased profits and valuations.
Although the investment costs of transitioning to an ESG focus may deter some, ultimately the cost of complacency will be far greater. Drivers for change are coming from both the outside of organisations, in the form of consumer demands and increasing regulatory pressures, and from within. Top talent, especially in younger generations, are increasingly aligning their personal expectations with potential employer’s purpose and ESG performance.
Social issues and equality will continue to be high on the agenda with organisations needing to lead the charge on the pay gap agenda, with legislation eventually enacted around maximum permissible pay gaps across all employee groups.
First Nations people will hold critical roles in the creation of new ESG initiatives and will work together with organisations to amplify Indigenous voices. We predict as Indigenous voices become more important this will amplify and give increased urgency and support for a First Nations Voice to Parliament and Constitutional recognition.
The ESG road to 2030 will not be an easy one to navigate and there will be transitionary disruption, as private industry charges ahead of policy and regulation. Organisations will need to meaningfully engage with a range of stakeholders and demonstrate tangible actions, beyond PR stunts. ESG mandates for transparency will propel the need for radical digital transformation. Emerging technologies will play an important role with ESG, with Digital Twin technology enabling organisations to monitor and adjust their business activities in real-time.
5 key take-outs from Looking Ahead: ESG 2030 Predictions:
- ESG doesn’t grow on trees – it won’t come for free: Products, services and company valuations will reflect the cost of doing “ESG business”, which will either be absorbed by the business or passed onto the consumer. There will be a market for high ESG-rated products which despite being more costly, have the “ESG edge”.
- Biodiversity will be seen as a new asset class: 50 percent of GDP (US$41 Trillion) depends on high-functioning ecosystems, with one in five countries at risk of their ecosystems collapsing. The key metric for this asset class will be “Environmental Profit”, the measurable benefit of a decision on the natural world, becoming a component of Return on Investment (ROI).
- The emergence of ESG-ruptcy will result in blacklisting and personal liability. Demand for ESG practices will lead to the introduction of ESG rating and certifications. Non-compliance will be met with severe consequences.
- An ESG data boom will lead to new ESG-data based business models and startups, fuelled by VC funding. There will be an exponential increase in the amount of ESG data to manage and analyse globally, coming from multiple sources and in some cases, real-time.
- The rise of ESG “cowboys”: as the lucrative nature of successful sustainable business models become apparent, bad actors will attempt to exploit the “wild ESG west”.
Sitting on the fence will no longer be an option. The consequences of poor ESG performance will be severe. From heavy regulatory penalties to brand damage, the cost will be extremely high. But organisations that transform their business models over the next decade, putting ESG front and centre of their operations and culture, will reap the rewards.