· 91% of Australians either don't trust what companies claim about their ESG performance, or are unsure.
· Research reveals that while people expect business to play a role, they feel current efforts are falling short. There is a strong underlying level of cynicism around perceived ESG "green-washing".
· For ESG action to have a reputational benefit, it must be authentic, go beyond an ambition or target to make a meaningful difference, and also be backed by ongoing commitment over time.
Newly released national research has thrown the substantial ESG challenge for corporates into sharp focus.
"The clear message is that companies cannot just phone in their ESG response. Public expectations are high, they want business to play a positive leadership role in society, but they view current efforts as falling short," Managing Partner of SEC Newgate Australia Brian Tyson said today.
The findings identified by SEC Newgate Research revealed that more than 40 per cent (42%) of the 1,200 Australians surveyed don't trust what companies claim about ESG, and a further 49% are unsure.
"Even when Australians are aware of the ESG initiatives, there is a high underlying level of scepticism and distrust about motives and effectiveness. Some efforts are seen as superficial and more 'virtue-signalling', focused on style over substance. These may actually erode an organisation's reputation and credibility," Mr Tyson said.
"There is a significant disconnect when it comes to credit and credibility for business' ESG programs, especially for larger businesses. Australians really struggle to come up with examples of companies making positive ESG contributions, despite many companies investing significant funds and resources into environmental, community and other programs.
Despite the lack of trust and scepticism, more than 80% of those surveyed agree that companies have the power and influence to make a positive difference in the world, however public expectations are high.
"A minimum standard of performance has been factored into public expectations, and companies will be punished if they fall short," Mr Tyson said.
Mr Tyson said that the research had also identified a potential methodology for businesses to bridge this disconnect.
"ESG isn't just about what is done. It matters who is doing it and how they're doing it. This means there's no blueprint that can be uniformly applied. ESG actions are seen in the context of a company's reputation, sector, track record and the health of its relationships. However, if you have the basic ESG hygiene factors in place, there is the potential for a short to medium-term bump from your broader ESG program, if you get the execution right.
"For an ESG action to have a reputational benefit, it must be entirely genuine, make a meaningful difference, and be backed by persistent commitment over time – not just a one-off sugar hit to throw money at a weakness or squeeze into a Sustainability Report.
"Beyond this, it also appears that businesses that really want to make an impact need to consider taking a tough position that may involve a cost or additional reputation risk, that isolates them from potential customers, interest groups or industry peers. This appears to demonstrate to consumers that the business is genuine about making a tangible difference in its selected area," Mr Tyson concluded
The findings are based on research conducted over the past six weeks that builds on the inaugural SEC Newgate ESG Monitor released last year. The new study comprised eight focus groups and follow up in-depth interviews, followed by a representative national online survey of 1200 Australians conducted between 7-11 March 2022.
Other key findings include:
Ÿ 52% of Australians believe it is highly important for companies to take action on ESG (rating it 8 or higher out of 10, where zero is not important at all and 10 is very important).
Ÿ Yet the overall average rating of companies in Australia on ESG is 5.6 out of 10.
Ÿ Companies generally received lukewarm ratings for their performance on ESG matters – with scores averaging between 5 - 6 out of 10.
- Business is seen as performing best on promoting equality and diversity in the workforce (5.9 out of 10);
- While it performs worst on paying their fair share of taxes (average 4.8 out of 10).
Ÿ Only 23% say ESG issues are highly important in influencing their day-to-day purchasing decisions (rating it 8 or higher out of 10, where zero is not important at all and 10 is very important).
Ÿ The level of disengagement is reflected by the large proportion - 75% of people – who "never" or "rarely" research or look
