KPMG Australia has released its predictions for environmental, social and governance (ESG) over the next decade in a new report.
The firm expects that increased regulation, stakeholder demands and mandatory ESG disclosures will force organisations to transform their business models by 2030.
Businesses that prioritise ESG during the next decade will be rewarded, while those that fail to adequately adapt will suffer the consequences, according to KPMG.
“Although the investment costs of transitioning to an ESG focus may deter some, ultimately the cost of complacency will be far greater,” said KPMG Futures partner-in-charge James Mabbott.
“Drivers from change are coming from both the outside of organisations, in the form of consumer demands and increasing regulatory pressures, and from within.
“Top talent, especially in emerging generations, are increasingly aligning their personal expectations with potential employer’s purpose and ESG performance.”
KPMG predicts there will be an increased demand for ESG-centric leadership teams with new C-suite roles such as chief impact officer, chief purpose officer and chief ESG ethicist.
Mandatory ESG ratings and certification processes are expected to be in place by 2030 in response to calls for transparent and proven ESG policies and practices.
“Investors and shareholders will have high ESG expectations and poor performing organisations will be starved of capital and see impacts on their share price,” KPMG predicted.
“By 2030, poor performers have been weeded out and consistent non-compliance will be met with severe consequences including penalties, public naming, a prohibition to operate and even imprisonment.”
Social issues and equality are also expected to remain in focus, with KPMG predicting more action on the gender pay gap and issues facing Indigenous peoples.
“Organisations will need to demonstrate their commitment to key social issues – sitting on the fence will no longer be an option,” said Mr Mabbott.
The cost of ESG is set to be reflected in products, services and company valuations which will either be absorbed by businesses or passed on to consumers.
Some consumers may reject paying a premium for ESG, while others will be willing to spend more for high ESG-rated products that have an “ESG edge”.
The firm also warned about the rise of “ESG cowboys” who attempt to exploit lucrative sustainable business models using misleading and unsubstantiated claims but will eventually face increased scrutiny to prove their ESG credentials.
To hear more about these issues as well as tips and tools to engage more socially aware clients, be sure to attend the ESG Summit in 2022.
Visit the ESG Summit homepage for more information and to secure your place.
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
