Corporate ESG And Sustainability Budgets Set To Explode in 2022
Data from the new Verdantix Global Survey: ESG & Sustainability Governance, Budgets, and Priorities 2021 - collected from interviews with 400 leading corporate ESG and sustainability decision makers – has revealed that 57% of firms are expecting impressive double digit increase in budgets in 2022. Further analysis reveals that corporate spending is set to focus on initiatives relating to supply chain and climate change management.
Firms are under growing pressure to engage with supply chains on sustainability–related issues. This pressure is the result of increasing regulation concerning supply chain management, such as the EU Waste Framework Directive, and from stakeholder interest in supply chain performance. Firms which fail to adequately embed sustainability in supply chains risk very real reputational and financial damage; consider UK fashion firm Boohoo, which saw a drastic loss in valuation as a result of poor employment practices in manufacturing firms. It is no surprise then that for a quarter of our survey participants, improving supply chain sustainability metrics (and therefore data collection) was the number one sustainability priority in 2022.
Concurrently, sustainability initiatives linked with climate change related issues are set to receive considerable investment in the near future, according to 40% of survey participants. This scheduled spend marks firms’ response to diverse regulation concerning climate change, including the scheduled EU Corporate Reporting Directive, and most notably the rise in prominence of disclosures adhering to the Taskforce For Climate-related Disclosures (TCFD). Already mandatory in the UK and New Zealand, growing numbers of firms are leveraging TCFD frameworks to signal to investors that they are engaging with climate change related developments. And with COP26 just around the corner, expect corporate focus on energy transition plans, climate change risk, and emissions management initiatives and technologies to gain momentum.
Supply chain and climate change-related initiatives overlap significantly with regards to corporate net zero goals, which are being made by increasing numbers of firms (see Verdantix: FTSE 100 Net Zero Goals Reveal Critical Success Factors), and often require Scope 3 targets. Corporate ESG and sustainability software suppliers should consider how best to align current offerings with these highlighted focus areas, including specific developing disclosures and regulations. Firms with out-of-the-box offerings geared towards supply chain compliance and climate reporting are set to benefit from corporate spending plans in the near future; in the longer term, expect corporate attitudes to shift towards the development of comprehensive ESG information architectures.