By Tim Bovy and Ian Hodges
Surveys from KPMG and EY show that the momentum behind realizing the long-term commercial benefits from a forward-thinking commitment to ESG is outpacing the parochial emphasis on short-term profits, on yielding to shareholder pressure, and on caving into anti-woke autocrats.
A survey of more than 200 companies across Europe by EY and released in March 2023[1] found that 76% of companies with strong ESG reporting in place were optimistic about their financial performance compared with 45% of companies with weaker controls.
“According to the survey, 74% of all respondents say their company should address environmental, social and governance (ESG) issues, even if doing so reduces short-term financial performance. However, nearly two-thirds of respondents (64%) also reported that short-term earning pressure from investors was impeding their longer-term investments in sustainability. This suggests that despite the clear business benefits of addressing ESG issues, pressure from short-sighted investors remains a serious concern.”[2]
This pressure to prioritize short-term earnings over securing a robust operational future is likely to persist, and to gain prominence when governments such as the Trump administration in the US push back on the green transition, diversity equity and inclusion (DEI), and anything else that they regard as woke and restrictive to the free hand they feel business should have.
Despite this, a KPMG survey[3] has concluded that ESG reporting has become integral to almost all of the world’s largest 250 companies and for a substantial portion of the top 100 companies in 58 different countries. The key reasons for this widespread adoption were seen as getting ahead of the introduction of mandatory reporting requirements, attracting ESG-motivated investors, and managing the financial implications on the business of ESG-related issues. This last point was seen as a key driver for the adoption of double materiality beyond the territoriality of the Corporate Sustainability Reporting Directive (CSRD). Increasingly ESG is seen not as an add-on but as an integral part of long term business success.
Greenwashing offers a shortcut to take advantage of one of the corporate benefits of ESG, the willingness of consumers to choose a green option, and even to pay a little more in order to do that. It’s a cynical ploy but not an irrational one. Evidence now suggests the majority of people in all countries of the world support action on climate change[4] [5]. While the majority of greenwashing occurs in marketing material it can be found in all forms of corporate communication.
In March a US sugar company was accused of greenwashing and of deceiving consumers and endangering public health[6] and in April the UK Competition and Markets Authority acquired new powers to act on greenwashing claims[7]. B Corp certification has recently responded to criticism that it facilitates greenwashing by revising its standard to “raise the bar”[8].
With the increased adoption of ESG reporting, the credibility and reliability of those reports is more significant than ever and across the world efforts are intensifying to call out greenwashing. The EU’s Directive on Empowering Consumers for the Green Transition and the Green Claims Directive are examples, as is the UK’s move to strengthen the Digital Markets, Competition and Consumers Act 2024.
All of this is evidence of the continuing commitment to ESG by companies, governments and standards bodies and the recognition of its value to society globally. In its promotion of stakeholder capitalism, the World Economic Forum (WEF) focuses upon long-term value creation and ESG measures, in opposition to the Friedmanite model’s emphasis on short-term profit maximization.
We are seeing this shift towards the benefits of ESG not only in the EU, through its CSRD and Corporate Sustainability Due Diligence Directive (CSDDD) requirements, but also, for example, in the United Arab Emirates where the UAE Securities and Commodities Authority (SCA) has mandated sustainability reporting for public joint stock companies listed in the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX), requiring them to publish an annual sustainability report, detailing their long- term strategies and the impact of their activities on the environment, society, economy, and governance, preferably in line with standards like the Global Reporting Initiative (GRI).
This commitment to ESG contrasts markedly with the U.S. investment community where firms, including Blackrock, are abandoning social and environmental engagement for fear of being accused of woke capitalism.[9] “By contrast,” notes Michael Posner, “European governments are moving forward, spurred on by public demands for government regulation of environmental and social norms globally. The U.S. investment community can either step up and embrace this important and timely agenda or it will default this space to European regulators who also will set the standard for the largest U.S. companies doing business in Europe.”[10]
As the surveys show, the momentum behind realizing the long-term commercial benefits from a forward-thinking commitment to ESG is outpacing the parochial emphasis on short-term profits, on yielding to shareholder pressure, and on caving into anti-woke autocrats.
About the Authors
Tim Bovy has over 35 years of experience in designing and implementing various types of information and risk management systems for major law firms such as Clifford Chance; and for international accountancy firms such as Deloitte. He has also developed solutions for organisations such as BT, Imperial Tobacco, Rio Tinto, the Kuwaiti government, The Royal Household, and the US House of Representatives. Tim is an elected member of The Royal Institute of International Affairs, Chatham House, an Independent Think Tank based in Central London, and holds a BA degree, magna cum laude, from the University of Notre Dame, and MA and C.Phil degrees from the University of California, Davis.
Ian Hodges has worked in a variety of information management roles over a twenty-year career. He has designed and implemented records and information management systems at a national scale, developing parts of the digital archive at The National Archives (UK). At a corporate level he’s undertaken information management projects with The Royal Household and Her Majesty’s Treasury. Ian also has information rights expertise developing policies and procedures for Freedom of Information and Data Protection compliance and working as a Data Protection Officer. In addition to CISM, CIPP/E and CIPM certifications, Ian holds a BA degree from the University of Southern Queensland, a postgraduate diploma from Deakin University, Melbourne and an MA from Birkbeck, University of London.
References
[1] Third annual EY Europe Long-Tern Value and Corporate Governance Survey, https://www.ey.com/en_gl/insights/long-term-value/how-can-effective-governance-unlock-value-from-sustainability
[2] https://www.ey.com/en_gl/newsroom/2023/03/new-ey-survey-finds-critical-link-between-sustainability-governance-and-business-performance
[3] KPMG Survey of Sustainability Reporting 2024, https://kpmg.com/xx/en/our-insights/esg/the-move-to-mandatory-reporting.html
[4] Hannah Ritchie (2024) – “More people care about climate change than you think” Published online at OurWorldinData.org. Retrieved from: ‘https://ourworldindata.org/climate-change-support’
[5] Mark Hertsgaard and Kyle Pope, ‘A silent majority of the world’s people wants stronger climate action. It’s time to wake up’, The Guardian https://www.theguardian.com/environment/commentisfree/2025/apr/23/climate-action-public-support
[6] Florida sugar company’s environmental claims are ‘greenwashing’, lawsuit says, The Guardian, 5 March 2025, https://www.theguardian.com/us-news/2025/mar/05/florida-crystals-sugar-lawsuit
[7] UK drinks brands face fines for greenwashing, The Spirits Business, 8 April 2025, https://www.thespiritsbusiness.com/2025/04/uk-drinks-brands-face-fines-for-greenwashing/
[8] New B Corp rules unveiled after critics allege greenwashing, FT.com, 9 April 2025,
https://www.ft.com/content/8667fd7d-3e3f-49ed-89a2-d0f11cb5a4d5
[9] Michael Posner, “How BlackRock Abandoned Social And Environmental Engagement,” Forbes, Sep 04, 2024 available at https://www.forbes.com/sites/michaelposner/2024/09/04/how-blackrock-abandoned-social-and-environmental-engagement/
[10] Please see footnote 8 above.
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