Companies increasingly view ESG initiatives as a competitive advantage, making growing investment in compliance, third-party solutions, and AI integration to better navigate complex regulatory and strategic landscapes
With geopolitical tensions, economic uncertainties, and environmental crises as a backdrop, many businesses are increasingly prioritizing their Environment, Social & Governance (ESG) initiatives to help them navigate this complex landscape.
To shed further light on this, the Thomson Reuters Institute has published its annual State of Corporate ESG report, which offers a comprehensive look into how companies are adapting to new challenges and opportunities in the ever-shifting world of corporate ESG requirements and activities.
Investment as a competitive advantage
The report highlights a significant increase in the number of C-Suite and functional corporate leaders who say they now view ESG investment as a source of competitive advantage. In 2024, 71% of survey respondents said they agree or strongly agree with this sentiment, up from 60% in 2023’s report. Additionally, 82% now say they believe that the role of ESG in corporate performance will continue to grow, reflecting a broad consensus on its strategic importance.
Likewise, many companies are placing greater emphasis on ESG, despite the political headwinds that many such initiatives are facing in the current environment. The report highlights a year-over-year increase in organizations aspiring to lead in ESG, driven by the need to comply with regulatory requirements and the desire to seize competitive advantages. This trend underscores the growing recognition of ESG as a vital component of corporate strategy.
Further findings in the report include:
Regulation and compliance-focus drives more CFO involvement with sustainability — ESG programs are becoming more compliance-focused, reflecting the heightened regulatory scrutiny. Chief financial officers (CFOs) are playing an expanding role in ESG management, leveraging their expertise in regulatory reporting and compliance. Their involvement signifies a shift towards integrating ESG into the core financial and operational strategies of companies.
Growth of third-party solutions moves beyond greenhouse gas emissions — An increasing number of companies are turning to third-party solutions to address a wide range of ESG activities. Investments in these solutions have broadened beyond simply tracking greenhouse gas emissions to encompass wider areas such as those involving water, waste, plastics, raw materials, human rights, and governance. This trend illustrates the growing complexity and scope of ESG initiatives, as well as the need for specialized tools to manage them effectively.
Many companies are placing greater emphasis on ESG, despite the political headwinds that many such initiatives are facing in the current environment.
GenAI forecasted to bring about improvements in team effectiveness — Generative artificial intelligence (GenAI) is emerging as a transformative force in ESG management. The report reveals that ESG leaders see vast potential in GenAI to better enhance compliance, improve accuracy, drive efficiencies, and free up resources for strategic initiatives. By augmenting resource-stretched teams, GenAI can help companies focus on value-added areas beyond mere regulatory compliance.
Overall, the 2024 State of Corporate ESG report paints a picture of a rapidly evolving landscape in which companies are balancing regulatory demands with strategic opportunities. As businesses continue to navigate these challenges, the integration of third-party solutions and innovative technologies like GenAI will be crucial in driving successful ESG outcomes.
Also, the strong desire among stakeholders for companies to play a positive, leading role in achieving sustainability goals cannot be ignored, positioning ESG as a central pillar of corporate strategy in the years to come.
You can download a full copy of the Thomson Reuters Institute’s “2024 State of Corporate ESG” report by filling out the form below:
