The environment, social and governance or ESG dynamics are changing in the US!
As the ESG frameworks get more complex, more and more enterprises are turning to experts for help.
More so—US companies bear the brunt from consumers, communities, investors, market demand, and global mandates.
Investors and financial services companies are driving the demand for ESG services among organizations. The change in ESG dynamics is a result of their realization of the connection between reducing ESG risk and raising market value.
A 2023 ISG Provider Lens Sustainability and ESG report predicts significant growth in US enterprise investments in sustainability and ESG initiatives.
The authors note that many businesses don’t record or store ESG data. While demand for these services is lower in the US as compared to Europe, factors like investor preferences, consumer purchasing behavior, and geopolitics are changing the ESG dynamics. Businesses across all regions are exposed to risks such as regulations, reputational damage, increased capital expenses, and weather-related asset damage.
The authors note that investors and financial services firms are driving the demand for ESG services. The organization’s realization of the link between lowering ESG risk and increasing market value is what is causing the change in ESG dynamics. Nonetheless, legal actions taken against financial institutions that select assets by ESG guidelines could obstruct US economic expansion, they caution.
Companies operating in the US may be required by upcoming federal and state laws to reveal hundreds of data points about emissions, decarbonization, and risks associated with climate change.
More regulatory bodies around the world require businesses to disclose and improve their ESG performance. It is becoming more challenging for these companies to locate and obtain the necessary ratings and benchmarks. In addition to environmental performance, which has traditionally been the primary focus of evaluations, social and governance aspects are now often included. In response to these challenges, the number of rating and benchmarking services available globally is rapidly expanding, the authors wrote.
According to Andy Miears, Director, Adaptive Organization, ISG, “US companies know they need to improve their sustainability and ESG performance but face increasing complexity at every turn.”
Jan Erik Aase, Partner and Global Leader, ISG Provider Lens Research, said, “New regulations will significantly increase the data collection and reporting burden on U.S. companies, driving demand for services to help them comply. A lot of businesses today either don’t record this data at all or store it in different systems.”