APAC firms lagging in adoption of crucial ESG measures: report
Companies should align ESG targets with business strategies and make sure they are measurable.
While more than half or 58% of companies in Asia Pacific said environmental, social, and governance (ESG) is critical to their long-term success, most have not yet fully integrated key measures, according to a survey by professional services firm Aon.
Results of Aon’s latest Asia Pacific Corporate Governance and ESG Survey report showed only 29% of companies surveyed in the region have ESG-related goals and key performance indicators for their C-suite, with listed firms more likely to have clearer metrics than privately held companies.
A little over a third of the respondents have a dedicated ESG function and most are still in early stages of using ESG metrics and developing their ESG profile. Rather than compliance requirements, business strategy served as the main driving force to work towards their sustainability goals since the regulatory environments are still developing in most countries.
“It is becoming clear that failing to address and integrate ESG metrics in the future will expose companies to reputational risk, financial impacts and regulatory consequences as they navigate new forms of volatility,” said Boon Chong Na, advisory partner and corporate governance and ESG lead for Asia Pacific at Aon.
In ramping up ESG efforts and monitoring, the report said boards and managements of companies in the region should better understand the link between ESG and their business strategies.
They should also learn how to use metrics and performance measures as their strategies mature, but Simon Kennedy, partner and head of people solutions for Australia at Aon, emphasised the need to set targets that are as measurable as their financial targets.
The survey also showed 41% of companies have no formal process or a training program to educate their board members about ESG.
“Training is required to ensure board members are adequately informed and capable of making sound judgements about the ESG risks and opportunities under their governance,” Kennedy added.
The survey polled 255 companies and their senior leaders in different sectors across APAC.