Australian businesses trail with ESG practices, says Cognizant

Australian organisations are behind on environmental, social, and governance (ESG) initiatives, with only 35% meeting their established goals over the past two years. That is according to a study from global professional services firm Cognizant, which sheds light on sustainability in business.

Despite being behind on ESG initiatives, a survey of 3,000 executives reveals a growing willingness to spend more over the next few years.

Between 2020 and 2025, the percentage of respondents that reported they would be increasing their sustainability spending by 10% or more nearly doubles (from 26% to 51%). It is then projected to grow to 62% from 2025 to 2030, according to the Cognizant survey.

That is because business leaders are well aware of the positive impact ESG can have. The number of respondents who expect their sustainability efforts to drive stronger financial performance is projected to grow in the next few years. 80% of respondents are convinced that their organizations’ sustainability initiatives will positively impact their financial performance by 2030.

“A new breed of strategic business thinking is amongst us, where Australian leaders must be urged to have sustainability at the core of their operations,” said Robert Marchiori, Australia Country Managing Vice President at Cognizant.

“ESG-aligned transformation is no longer just a ‘nice to have’, but rather is an essential practice to foster innovation, and future-proof businesses in an increasingly climate-action aware world.”

When asked to choose the most important drivers for environmental sustainability, 59% chose that it is “the right thing for society and ensures economic sustainability.” For another 57%, “improve business performance,” was a top three driver and for 45% a major driver was to “demonstrate action to the investment community.”

As a remedy to Australian organizations’ faltering ESG progress, the study notes that organizations should focus on limiting harder-to-reach Scope 3 emissions – those that are not actually produced by the company itself nor are the result of its activities, but are produced up and down its value chain.

Insofar as reaching Scope 3 emissions, the report notes that “the collaboration, transparency and information sharing involved will require new, disruptive ways of leading and operating that may change organization structures and even business models, but it’s a golden opportunity to move into richer and more lucrative relationships.”