Business Leaders Increase Risk by Not Placing More Focus on Governance and ESG Reporting

While four in five (81%) business leaders in the UK and the US feel they are performing better than their industry’s average on ESG issues over the past two years, there is much less confidence around their organisations’ corporate governance. In contrast, less than 30% of executives feel confident they are outperforming their industry peers on governance issues, such as internal controls, lobbying and board composition.

Our ESG Pulse Report polled 200 senior decision makers at public and private companies in the UK and US markets about their views on the importance of ESG issues, responsibilities and collaboration. Here are some of the key findings.

Governance performance

Executives felt their companies’ performance on governance issues was significantly lower than their performance on social and environmental issues. Less than 20% of executives felt their business had performed better than their industry peers on political contributions, lobbying, bribery and corruption and board composition, in comparison to more bullish attitudes towards their performance on social and environmental issues such as health and safety (59%) and climate change (47%).

UK trails the US in prioritizing attention on ESG frameworks and ratings

UK business leaders are placing less importance on ESG frameworks and ratings than in the US as part of their internal evaluation of ESG performance but lead the US with take-up of ESG reporting providers.

With multiple ESG frameworks and requirements to navigate in each market, its perhaps less surprising that executives on both sides of the Atlantic find the current ESG reporting too burdensome (90%).

However, more businesses in the UK (90%) than in the US (78%) are turning to specialist third party providers to support their ESG data collection and reporting.

Of those using third party reporting services, less than half are using it to organise their internal data and to track KPIs using external data, missing an opportunity to report more securely and effectively. Over half (58%) of organisations are relying on general file sharing services such as Microsoft Teams, Dropbox and Google Drive to collate ESG information and reporting, rather than a disclosure management system.

Lack of preparedness for ESG reporting changes

While three-quarters (75%) of executives already predict that ESG reporting will increase further over the next three years, four in five (79%) say their organisation will be unprepared if financial regulators change reporting requirements.

“Business leaders know that ESG reporting is a moral and a financial responsibility, and not putting enough focus and priority on corporate governance and ESG reporting is a weakness for their business” commented Craig Clay, president of Global Capital Markets at DFIN. “Our Pulse ESG report highlights that governance has been a lower priority for businesses, but good governance practices and ESG reporting are key to effective business performance overall as a result of more effective decision making and maintaining trust and a positive reputation with its stakeholders.”

Find the full DFIN ESG Pulse Report here.

About DFIN 

DFIN is a leading global risk and compliance solutions company. We provide domain expertise, enterprise software and data analytics for every stage of our clients' business and investment lifecycles. Markets fluctuate, regulations evolve, technology advances, and through it all, DFIN delivers confidence with the right solutions in moments that matter. Learn about DFIN's end-to-end risk and compliance solutions online at www.DFINsolutions.com or you can also follow us on Twitter @DFINSolutions or on LinkedIn.