S-RM: Two thirds of companies expect ESG budgets to increase over the next five years

S-RM, leading global intelligence and cyber security consultancy, has published its 2024 ESG Report which reveals corporate concerns are shifting from traditional environmental issues to social – with human rights and modern slavery, EDI (equality, diversity and inclusion) and community programmes taking centre stage amongst corporate ESG strategies.

In 2024 the landscape of ESG considerations has taken a seismic shift as companies re-evaluate their priorities. According to S-RM’s recent findings, social governance is going to be a bigger strategic and budgetary priority for a substantial portion of companies over the next five years.

Regulatory concerns

Nearly a quarter (23%) of corporations have identified ‘domestic modern slavery laws’ as their foremost regulatory concern, compared to 15% prioritising the CSRD (Corporate Sustainability Reporting Directive). This focus underscores the growing acknowledgment of the importance of social issues and human rights in ESG strategies.

Despite the higher threshold of the recently-passed CSDDD in Europe, only 13% of corporates considered it the most important regulation for them to consider, suggesting that they may be caught out as the EU progresses its ESG agenda in coming years.

Further to this, approximately one-quarter of both investors (24%) and corporates (26%) lack awareness of social issues or challenges within their industry, underscoring a critical knowledge gap.

Some of the negativity currently surrounding ESG comes from considering it purely as an asset class, when ideally it should be integrated into the governance structures of a company. This lack of understanding poses significant operational risks to businesses that do not consider the direction of travel, potentially impacting reputation, stakeholder relationships, and long-term sustainability. Addressing this gap is crucial for integrating social considerations into ESG frameworks effectively.

ESG alive and well

The momentum towards Social is further emphasised by the anticipation of increased ESG budgets over the coming years. A remarkable 66% of companies expect their ESG budgets to rise within the next five years, with a substantial allocation earmarked for addressing social concerns. This trend not only highlights the evolving corporate approach to ESG but also underscores its emergence as a crucial commercial driver.

Natalie Stafford, Director and Head of ESG at S-RM, said:

“At S-RM, we recognise the continued importance of addressing the social elements within ESG strategies. Our survey has highlighted the widespread lack of confidence that the Social pillar of ESG is being sufficiently tended to, with risks mitigated and value exploited across both investor and corporate groups. There is a clear consensus that Social risks are rising up the corporate and investor agendas, driven by a combination of employee retention, shareholder pressure, board instruction, regulation and legislation, and consumer and client demand.

“Our findings demonstrate that in the corporate world, ESG remains firmly on the board agenda, supported with growing budgets among 66% of companies. We’re observing a shift towards increased budgets tackling social issues specifically over the next five years.”

For more information, access the full 2024 ESG Report on S-RM’s official website here: https://www.s-rminform.com/esg-report-2024