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A majority of US CEOs (82%) see ESG as a value driver to their business over the next few years, and virtually all have developed a sustainability strategy. US companies are beginning to follow the example set by the European Union, where ESG reporting is further along and investors have come to see that improved government and community relations can accrue to the bottom line.¹
82% of US chief executives see ESG as a value driver to their business over the next few years
What are the top three things the CEO should activate immediately?
What are the CEO’s key considerations with respect to ESG risk?
Company culture
“Culture eats strategy for breakfast.”
As the leader at the top of the organization, the CEO needs to go beyond talking about ESG.
He or she needs to lead by example, making it clear that ESG is a company-wide philosophy that is integrated into the fabric of the organization. It’s not about, “We’re going to focus on ESG this month.” Rather, it should be, “We need to be thinking about ESG in everything that we do as a company.” Make it part of the culture, the performance measurement, part of the decision-making of how the company functions on a day-to-day basis. Where most organizations struggle is in those early stages. To build that initial momentum, the CEO should develop a working committee with members of the board and management that is focused on the ESG risk strategy and governance road map. Define roles, accountability, processes and procedures to get the ball rolling and bringing the individual business units together.
Develop a compelling ESG risk strategy that is embedded into the corporate strategy
EY sustainability and ESG strategy teams can help you create long-term value through strategy, M&A, capital allocation, ESG due diligence and portfolio optimization.
One of the key roles of the CEO is to set the course for his or her company, to show the way to the next big goal. Here is where the company can move beyond traditional business unit silos and begin integrating ESG systematically at every level of the organization. This could be explicitly embedding the circular economy into the strategy or ensuring key internal and external stakeholders are both fully invested in the circular economy plan and equipped with the necessary skills and knowledge to implement it.
Inspire each business unit
The CEO needs to convey that every business unit needs to integrate ESG into their team culture and everyday thinking.
For example, does the capital allocation strategy contribute to the development and roll-out of low-carbon technologies and wider decarbonization efforts? When M&A activity is discussed, is ESG part of the due diligence? Does the acquisition target, or the buyer, align with your values on net-zero emission goals and diversity, equity and inclusion targets (DEI)? Is there alignment when supplier and logistics agreements are being evaluated, when real estate decisions are being made, when travel plans are being coordinated? It needs to become part of the company’s DNA and decision-making process.
Related case study
Large industrial manufacturer:
▉ A $7.3b diversified Industrial manufacturer of solar energy panels and components needed to set new ESG 2030 goals in line with their industry peers especially now that the CEO is evaluated on ESG performance and the three-year ESG plan to increase disclosure, improve performance and establish strong governance.
▉ The EY organization was able to help identify topics, goals and an action plan that could be implemented on its three-year ESG plan with a phased approach.
