High-performing companies view ESG as value creator, with
senior executive accountability
BENGALURU, India, Dec. 8, 2022
/PRNewswire/ -- Increased ESG investment correlates with
higher profits, according to new research from the Infosys
Knowledge Institute, the thought leadership and research arm
of Infosys (NSE: INFY) (BSE: INFY) (NYSE: INFY), a global
leader in next-generation digital services and consulting. The
report identified actions that companies should take now to achieve
ESG goals and generate financial returns across sustainability
initiatives.
The Infosys report, ESG Redefined: From Compliance to Value
Creation, reveals that nearly all (90%) executives said their
ESG spending led to moderate or significant financial returns. Most
respondents (66%) experienced ESG returns within three years. The
report acknowledges that despite ESG's clear link to profit growth,
budgets are likely to be an obstacle in the current
economy. This is worrisome, as companies need more financial
resources and operating model changes to achieve ESG goals and
sustain profit growth.
Mohit Joshi, President,
Infosys, said, "There is nothing novel about the idea that you
have to spend money to make money. However, although 90% of
respondents in our study say ESG gives ROI, there is still a lag in
applying strategy to ESG as it is done for other parts of their
businesses. Companies must shift views to recognize ESG as a value
creator to reap the financial benefits of ESG investments and to
achieve maximum impact in creating a better, more sustainable
world."
Strategy alignment and execution will allow businesses to
accelerate their ESG initiatives with greater payoff. The Infosys
Knowledge Institute revealed several insights to guide companies to
accelerate ESG's financial rewards:
- ESG is a proven moneymaker. The report found that a 10
percentage point increase in ESG spending correlates with a 1
percentage point increase in profit growth. A company that
currently spends 5% of its budget on ESG can expect a one
percentage point profit increase if it aligns operating or capital
budget to increase ESG spending portion to 15%.
- Overlooking the 'S' and 'G' in ESG reduces
profitability. Many companies focus ESG efforts on the
environmental segment with commitments to carbon neutrality, net
zero, and reducing greenhouse gas emissions. However, there are
also opportunities to improve financial results through social and
governance initiatives. Research data shows social initiatives like
board diversity correlate to improved profitability.
- ESG leadership strategy correlates with a 2 percentage point
increase in profit and revenue growth. Companies perform better
financially when they demonstrate all the following: a chief
diversity officer (CDO), chief sustainability officer (CSO), ESG
committee on the board, and also when the CSO clears capital
expenditures for ESG initiatives. However, only about a quarter
(27%) of those surveyed say their company has all four components
in place. The survey data analysis also found that the C-suite and
top executive ranks were the most neglected areas for ESG changes.
Only 19% of respondents say their company ties executive
compensation to ESG goals, and just 30% say their firms place
responsibility for ESG with the C-suite.
- Supply chain transparency matters. Research found that
almost all companies are interested in aligning their ESG goals
with their supply chain, especially as more companies are expected
to account for their scope 3 greenhouse gas emissions. However,
less than one-third share ESG expectations or requirements for
suppliers. Only 16% say they renegotiate contracts based on ESG
data from those in the supply chain — indicating a clear need for
more leadership in the supply chain and incentives to share ESG
data, whether it's meeting new contract requirements or making
themselves more appealing to others in the supply chain.
To read the full report, visit here.
Methodology
Infosys used an anonymous format to conduct an online survey of
2,500 business executives across industries across the US, UK,
France, Germany, the Nordics, Australia, New
Zealand, China, and
India. To gain additional,
qualitative insights, the researchers interviewed subject matter
experts and business leaders.
About Infosys
Infosys is a global leader in next-generation digital services
and consulting. Over 300,000 of our people work to amplify human
potential and create the next opportunity for people, businesses
and communities. With over four decades of experience in managing
the systems and workings of global enterprises, we
expertly steer clients, in more than 50 countries, as they
navigate their digital transformation powered by the cloud. We
enable them with an AI-powered core, empower the business with
agile digital at scale and drive continuous improvement with
always-on learning through the transfer of digital skills,
expertise, and ideas from our innovation ecosystem. We are deeply
committed to being a well-governed, environmentally sustainable
organization where diverse talent thrives in an inclusive
workplace.
Visit www.infosys.com to see how Infosys (NSE: INFY) (BSE: INFY)
(NYSE: INFY) can help your enterprise navigate your next.
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SOURCE Infosys