The Expert View: Using ESG as a business opportunity

After years of momentum, the past 12 to 18 months have been a difficult period for ESG (Environmental, Social and Governance), said Dr Michelle de Jongh, Managing Director of ESG Services at Inspired, opening a Business Reporter breakfast briefing at the Goring Hotel in London.

 

While ESG is facing turbulence, she told attendees – ESG experts from a range of sectors – that the underlying pressures on resilience, energy use, social impact and supply chains have not gone away. The task is to help businesses stay committed in a climate where attention spans have shortened and scepticism has grown.

 

Part of the solution is to emphasise that ESG can add value, but that requires clear communication and more pragmatism. As one attendee put it, “It comes back to a conversation about what businesses are for.” If an organisation’s purpose extends beyond short-term profit, then ESG plays a vital role.

 

From reporting burden to strategic asset

 

Attendees were clear that the commercial rationale remains strong. ESG affects a company’s brand and perception, both in the marketplace and with staff. Younger employees in particular want to work for organisations that align with their values. Reputation also matters to investors, who increasingly see ESG disclosures as evidence of how well a business understands and manages risk.

 

Operational resilience is another rationale. Energy efficiency reduces exposure to price volatility, efficient use of materials helps manage scarcity, and stronger supplier relationships reduce vulnerability to disruption. A plant designed to withstand extreme heat or flooding, for example, reduces downtime and protects revenue. Digital twin modelling was cited as a way of quantifying these impacts and showing how early investments can prevent expensive failures later.

 

Yet benefits must be communicated in terms that resonate with the board. Many directors still ask, do we have to do this? Knowing which directors are already receptive, and using them as internal champions, was described as a useful strategy.

 

Fighting fatigue

 

Much of the discussion concerned obstacles that make ESG hard to embed. Short-term focus was considered a major barrier. Boards often work to one- or two-year plans, but issues such as decarbonisation or supply-chain reform require planning across five, ten or even 15 years. One attendee noted the example of transitioning away from coal power: “Ten years seems like a long time, but you have to start now.”

 

Cost is another hurdle. When organisations search for savings, ESG initiatives that are not tied directly to mandatory reporting are often first to be cut. Participants said this reinforces a vicious cycle: companies spend resources meeting compliance obligations, leaving no capacity for activities that would create further value.

 

Data burden and uncertainty compound the challenge. ESG reporting can feel like a never-ending sequence of data requests: collect it, check it, assure it, repeat. This can be demoralising. Attendees described organisations “losing interest” because the workload becomes overwhelming. Market noise adds to fatigue; with so many tools and standards available, choosing the right product can be paralysing.

 

Political drift

 

Political headwinds were another theme. In the United States in particular, ESG has become a polarised term. Some participants said their organisations no longer use the word “sustainability” in US communications because it distracts from the core message. This shift has emboldened sceptics: “People who were always cynical now feel they can say so openly.” However, some US states are stepping up ESG activity despite federal scepticism, creating an inconsistent landscape for global companies to navigate.

 

Perhaps the most difficult challenges lie in supply chains. Many companies do not have full visibility of their supply chain. Those that do can face uncomfortable ethical trade-offs. Solar panels made using forced labour may be cheaper and higher performing than those produced ethically elsewhere, for example, leaving boards to decide where to draw the line. Backing well-intentioned ESG programmes can also create unintended consequences. One attendee pointed out that the UK Living Wage scheme requires suppliers to raise wages, which can lead to layoffs if clients refuse to absorb the resulting higher costs.

 

These dilemmas, participants agreed, reflect the complexity of global supply chains rather than a lack of commitment. Businesses are often caught between cost, performance and ethics, with no easy answers.

 

Pragmatism and long-term thinking

 

So, how can organisations shift from compliance to value creation? Pragmatism was a common answer. Companies cannot do everything, so focusing on parts of the business, such as property, operations or procurement helps teams focus ESG efforts.

Participants also emphasised the importance of using the data companies already collect for compliance, which they have likely forgotten about. This could guide capital allocation, highlight risk concentrations and inform long-term planning. It should be treated as management information, they said, not just a reporting obligation.

 

Budget integration was another solution. Rather than treat ESG as a standalone cost, organisations can unlock funding by combining it with other transformation budgets. Framing long-term ESG goals such as large-scale IT programmes, complete with capitalisation on the balance sheet, helps CFOs understand the investment case. Long-term investors such as pension funds or long-term asset funds (LTAFs) are often better aligned with the necessary time horizons too.

 

Meeting supply-chain challenges requires nuance and context. One attendee highlighted local farming networks where family labour includes children. An outright ban on child labour might inadvertently harm them. Companies must decide whether to exit entirely or use their influence to improve conditions, choices that require sensitivity rather than rigid rules.

 

Closing the briefing, Dr de Jongh highlighted the pragmatism and awareness of trade-offs as encouraging signs that attendees understood the situation. She said it was clear that despite political noise, compliance fatigue and tightening budgets, participants still believe they can drive ESG forward, and they are determined to do so.

 

To learn more, please visit: www.inspired.com