Sustainability: From Buzzword to Business Critical
Moore Intelligence, Moore Global
1 April 2025
Ambitious mid-market companies that embrace ESG principles have reaped financial rewards, but they are now concerned about a new wave of regulation that will force them to ensure sustainability at every link in their global supply chains.
Nearly half (46.5%) of companies surveyed by Moore Global have implemented comprehensive governance practices to meet the increased level of scrutiny.
However, they are concerned about external risks, such as supply chain disruptions and cybersecurity attacks, that could impact their efforts to comply with the new rules.
The findings are the result of a long-term research project conducted by Moore Global that tracked the evolution of environmental, social and governance issues – the three pillars of ESG that companies of all sizes should consider as they plan their next steps.
“This is one of the most comprehensive studies of ambitious mid-market companies’ attitudes towards ESG, risk management and corporate governance,” says Moore Global CEO Anton Colella. “It shows that sustainability has gone from being a buzzword in boardrooms to being critical to business.”
“The companies we spoke to drive the global economy, so how they see the future is incredibly important to all of us. They are tackling complex challenges that may require significant changes to the way they have operated for decades.”
The research was conducted for Moore by the Centre for Economics and Business Research (Cebr). It reflects the changing views and concerns of nearly 4,000 business leaders in 12 key countries spanning the Americas, Europe, Asia, Africa and the Middle East.
Over the three years of our research, sustainability and ESG issues have become increasingly important on the agendas of investors, banks, regulators and clients.
A new regulatory framework is currently being developed that will enhance due diligence and require companies to audit their operations to adhere to a more stringent governance regime.
“We are seeing a rapid change in the regulatory environment for middle market companies around the world,” says Mark Stewart, global head of ESG at Moore. “Many middle market companies are becoming increasingly aware of the impact of ESG risks on their operations, particularly in terms of reputation, compliance and access to capital.”
The EU’s Corporate Sustainability Reporting Directive (CSRD) requires companies to report on the impact of their activities on the environment and society. Meanwhile, the International Sustainability Standards Council aims to develop a global baseline for sustainability-related disclosures that are focused on investor needs.
In the US, changes to the Federal Procurement Act are being proposed that would require certain federal contractors to disclose their greenhouse gas (GHG) emissions and financial risks related to climate change. They would also be required to set science-based targets for reducing their GHG emissions.
Our research found that only 55% of companies surveyed were very confident that their organisation was aware of the upcoming regulatory changes.
Among business leaders who were not very confident that their organisation was aware of the upcoming regulatory changes, the most common reason for hesitation was the complexity of the regulations, according to 39% of respondents.
Other reasons included: lack of clear information or guidance on regulatory changes (38%); limited internal resources or expertise to keep up to date with updates (36%); and previous difficulties in complying with regulatory changes (30%).
More than 80% of businesses have already adjusted their operations in response to upcoming regulatory changes, although the differences between the world’s largest economies are striking.
In the US, 42% of businesses surveyed, equivalent to 22,000 individual companies, have already significantly adjusted their operations in response to upcoming regulatory changes. Mobilization rates among European members of the G7 – France, Germany, Italy, and the UK – range from 30% to 35%.
Japan, the world’s third-largest economy, is lagging behind, with only 11% of companies changing their business practices in response to new regulations. The country is a major exporter and foreign investor, and the new rules will impact companies that trade across borders.
The bureaucracy associated with further regulation is often cited as a barrier to business and economic growth, but our research shows that those who have embraced the emerging new regime have reaped financial benefits.
Of the executives surveyed, 63% said previous regulatory changes had a positive impact on their organisation’s finances, and the same number (57%) expect upcoming changes to also have a positive impact on the bottom line.
However, this optimism is not shared by all. Emerging market economies such as the UAE, Brazil and South Africa are very positive, but this optimism is shared by less than half of respondents in more developed countries, which have already had to adapt to many changes in regulatory regimes.
A host of new regulations dictate the need for increased oversight – and here, readiness for them is uneven around the world. Some 46% of business leaders have already implemented comprehensive management practices, but almost as many (42%) say they have implemented some measures “but there is room for improvement.”
Among the most far-reaching regulations set to be adopted soon are requirements for companies of all sizes to be able to demonstrate the resilience of their entire supply chain, regardless of where they are based.
Some 45% of decision makers said supply chain disruptions are a greater risk now than they were five years ago.
More than half of companies expect supply chain audits to be conducted more frequently in the future, with the banking and finance industry being the most frequent.
In Brazil, a country that is seeking investment from the US, Europe and Asia, 56% of firms conduct audits at least four times a year, compared to the global average of 3.6 times a year.
This risk of cyberattacks is a major concern for mid-market executives, perhaps reflecting the fact that they may lack the cybersecurity expertise of multinationals.
Some 85% of companies are concerned that cyberattacks could have a negative financial impact on their organisation, and more than half (55%) believe that cyberattacks are a greater risk now than they were five years ago.
Our unique research shows that the new business reality for mid-market companies is very different to what it was before Covid. However, those that have adapted to the changes have thrived and in many cases are now more resilient than before.
Read the original article on the Moore Global website: https://www.moore-global.com/intelligence/articles/october-2024/sustainability-from-buzzword-to-business-critical
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