Enterprises downgrade ESG investments amid economic uncertainty, Google Cloud study finds

The challenging macroeconomic environment is prompting enterprises to deprioritise investing in environment, social and governance (ESG) initiatives in favour of activities that will deliver shorter-term revenue growth.

So much so, ESG initiatives have gone from being the top organisational priority for enterprises across the world in 2022 to a number-three priority this year – as firms find themselves under pressure to cut costs.

That’s according to the second annual Google Cloud-sponsored sustainability survey, which polled 1,476 top-level executives from 16 countries about their company’s ESG investment priorities.

The survey, conducted on Google Cloud’s behalf by The Harris Poll, revealed that respondents felt they were unable to deliver on their ESG ambitions as they were having to “do more with less” because of the weakened economy, and being encouraged to spend more time working on initiatives that are likely to generate revenue.

“The inability to execute, pressured by fewer resources, threatens to compound previous risks, unless executives take the appropriate steps,” wrote Justin Keeble, managing director for global sustainability at Google Cloud, in a blog post. “These include greater accountability, better measurement and management, and well-defined leadership.”

He also cautioned enterprise leaders against seeing ESG initiatives as a cost-cutting opportunity, because there is mounting evidence that consumers are more likely to engage with sustainable brands.

“Looking at sustainability as a short-term cost instead of a long-term investment is a missed opportunity,” said Keeble. “The vast majority (85%) of executives acknowledge customers are more likely to engage and do business with sustainable brands, but 78% are now forced to achieve sustainability results on less money than before.”

This year’s results also echoed some of the findings from the inaugural survey, which was published in April 2022, that showed there was an appetite within enterprises to do more on the sustainability front, but a lack of experience and knowledge means senior leaders are unsure of where to start and focus their efforts.

On this point, Keeble said 72% of respondents stated that everyone in their company wants to help “advance sustainability efforts” but no-one knows how, which is a 7% increase on last year.

At the same time, the poll also revealed that enterprises are struggling to get to grips with who should be accountable for making sustainability-related decisions in their organisations, with 84% stating they think their green efforts would be more effective if they had a better company structure with clear accountability.

“Executives believe having a dedicated leader who would govern sustainability initiatives is the number one action to help advance sustainability efforts,” wrote Keeble. “Coupled with strong leadership, 83% believe agile team structures will help them achieve their goals. With better measurement, clear decision-making and some creativity, companies can better position themselves to progress on their sustainability and business goals.”

Elsewhere, the poll revealed that greenwashing remains a pervasive concern among the respondents, with 59% admitting to overstating their company’s sustainability activities.

“Many believe greenwashing is accidental and underscores the need for accurate measurement, identifying a lack of tools as one of the biggest barriers to true progress,” he said. “Executives are eager for better systems to track their progress, with 87% of respondents looking to incorporate better measurement into their organisations to help make more accurate targets.

“Measurement is critical,” added Keeble. “But coupling accurate measurement tools with more ambitious targets is where we believe there is untapped opportunity.”