Most companies plan to spend more on ESG within the next three years, but they are less sure about how to execute on those strategies, a survey report published Feb. 13 by KPMG found.
Driven by reporting and shareholder demands, 90% of the 550 companies responding to the survey said they will invest more in environmental, social, and governance capabilities in the next three years.
U.S. firms represented 61% of respondents, followed by 25% in Europe, 12% in Canada or Mexico, and 1% each in Asia Pacific and South America.
Respondents represented multiple industries such as energy, financial services, technology, healthcare and transportation.
The main increases in ESG spend in the next three years will be through adding dedicated ESG personnel, software, and more employee training and education, among other steps, respondents said.
However, the Addressing the Strategy Execution Gap in Sustainability Reporting survey report found "a clear disconnect" between strategy and execution, with just 33% of companies having restructuring plans to align sustainability goals with business strategy.
Top challenges cited by companies included insufficient resources, collaboration or communication, divergent priorities, difficulty measuring return on investment and budget constraints.
Additionally, while 83% of companies considered themselves ahead of their peers on ESG reporting, 47% still use spreadsheets to manage ESG data, and only 18% use third-party verification sources.
The survey found many companies hoping for new technologies to help integrate sustainability practices, including artificial intelligence and machine learning, but Tegan Keele, KPMG's U.S. climate data and technology leader, said in a news release that "AI and ML are not a silver bullet for sustainability reporting or for setting a strategy that adds value to the business."
KPMG experts also cautioned companies not to focus on compliance at the expense of adding value. "Compliance alone should not dictate an organization's strategy — focusing on the core elements of ESG that will drive financial value over the long-term is paramount," Maura Hodge, KPMG's U.S. ESG audit leader, said in a news release.
