While many companies have set sustainability goals, a new ERM survey reveals that implementing them can be a bumpy ride, with a lack of incentives and internal engagement being among the highest hurdles.   

The sustainability transformation is accelerating, and companies worldwide have responded with ambitious goals, roadmaps, and strategies. Still, the integration of sustainability goals into the business plans and operations is not moving fast enough for companies to successfully navigate this transition and seize its vast commercial opportunities.

The ERM Sustainability Transformation Survey canvassed 1475 C-suite members and managers across industry sectors to examine business progress on operationalizing sustainability goals and identify the stickiest barriers to success and how to overcome them. Some key findings are:

Companies report that they are making more progress on social issues than climate and nature

Overall, respondents report their companies are making notably more progress on social issues than on decarbonization and lowering impact on nature. The lead of social issues is remarkably consistent across regions and sectors and within companies across functions and levels.

The lack of financial incentives tied to sustainability performance is the top barrier to action

The top three barriers blocking sustainability progress are sustainability-tied financial incentives, technologies that are too expensive or unavailable, and a lack of forceful regulation. Except for financial incentives, four of the top five hurdles are external. Surprisingly, respondents don’t believe that insufficient internal funding for sustainability initiatives is a significant barrier.

And companies are under-investing in the most promising solutions

Respondents rate the widespread introduction of sustainability-tied financial incentives and better staff training as having the highest potential to boost progress. However, implementation of these solutions is lagging, and businesses are not prioritizing them. Improving ESG data infrastructure is a third relatively neglected high-potential solution. 

Managers are less involved and more pessimistic than C-suite on sustainability performance

C-suite members more eagerly embrace sustainability as a crucial part of their job than operational managers. They also have a more optimistic view of their company's progress on social, climate, and nature goals. Managers see insufficient executive support and insufficient operational plans as important internal barriers to effective operationalization. They also rate limited shareholder interest as a notably bigger problem than C-suite members do.

Crucial functions for operational progress on sustainability goals feel the least engaged

The lukewarm attitude of pivotal corporate functions works against effectively operationalizing social, climate, and nature goals. Most worryingly, employees in operations/infrastructure feel the least engaged, followed by marketing/ communication and finance/legal/ investor relations.

Industrial sectors are most bullish on their sustainability performance

The finance, technology, and hospitality sectors are substantially more negative about their company’s sustainability progress than the mining, power &utilities, and oil & gas sectors, which suggests surprisingly high confidence among the industrial sectors despite their large ESG footprint. Industrial sectors feel most held back by unavailable technology and insufficient commercial returns, and service sectors by the lack of sustainability-tied financial incentives.

Informed by the survey findings and its experience working with clients, ERM recommends several practical solutions for unlocking progress. Companies should consider to

  • Introduce financial incentives linked to sustainability performance that make up a substantial portion of total compensation for both C-suite and operational managers. Performance ratings should be based on transparent, measurable, and individualized metrics and subject to independent oversight.
  • Increase educational and awareness support, such as bespoke leadership programs that bring in external experts as mentors, based on an assessment of sustainability-related competence and awareness gaps, and continuous training for operational managers tailored to functional needs that helps to develop both engagement and skills.
  • Equip managers with the tools they need to embed sustainability goals into business operations by putting in place an ecosystem of specific targets, detailed data, and hands-on monitoring solutions.
  • Enhance engagement of crucial functions by fostering cross-functional collaboration and translating the growing body of sustainability standards and frameworks into clear language that operational managers can understand and implement.

If we want to accelerate the operationalization and integration of sustainability, Companies first need a clearer picture of where and why progress is getting stuck. We hope the results of our ERM Transformation Survey can contribute to this.  Read our full survey report for detailed data, insights, and recommendations.

Download the report