ESG is Causing Very Real Business Headaches in 2023 and is More than Just a PR Concern, According to ALM’s New Pacesetter Report

A new report on ESG: Environmental finds that Innovators among professional services providers have recognized that compliance is an important factor of ESG, but fundamentally, ESG in 2023 is about how business gets done 

New York, NY – September 13, 2023–A new report from Law.com Compass Pacesetter Research (previously known as ALM Intelligence Pacesetter Research) finds that professional service providers and their clients are facing growing pressure to implement ESG-related programs from legislators, investors, and the business ecosystem (e.g., media, consumers, stakeholders, customers). This pressure from stakeholders to hold businesses accountable is countered by vague standards and metrics, uncertain ROI, and the growing politicization of the ESG concept, putting organizations between a rock and a hard place. As a result, the service emphasis among innovators in professional services has moved from a compliance checklist approach to one that is proactive and strategic, elevating the importance of incorporating ESG principles into an active risk management strategy.  This grounding of ESG in a business and risk management context has favored those service providers best able to align an effective, proactive ESG framework with the overall business strategy to deliver long-term value.

“This growing focus on ESG is likely linked to the pandemic and climate crisis (both with clear implications for the global economy) so that investors and policymakers have realized the importance of at least tracking ESG-related data and metrics as they struggle to adapt to a rapidly-changing world,” said Ruth Sierra, Analyst, Law.com Compass Pacesetter Research. “Today’s Innovators are those professional services providers who help clients develop an ESG strategy that is directly aligned to the business strategy, reducing risk and optimizing opportunities to build long-term value.”

Key trends identified in this research include:

– Despite the lack of a single, universal metric or standard for monitoring and managing ESG-related criteria, ESG has still managed to become a significant factor in capital allocation and M&A deals

– While stakeholder activism and increasing regulations continue to be key drivers for ESG, as business leaders identify weaknesses in their supply chain and its impact on long-term sustainability, interest in ESG principles and frameworks is rapidly growing, increasing demand for more business operations-focused ESG solutions 

– ESG-related initiatives are often seen as a cost to an organization’s bottom line, and business leaders struggle with developing a business case that accounts for the financial ROI

– Coupled with the lack of data, there is also the issue of poor uniform reporting standards and metrics, causing organizations and investors to each define and measure ESG-related issues differently and, as a result, report in different ways on these issues, hindering evidence for ROI

– With the lack of cohesive and defined measurement criteria, successful solutions rely heavily on advanced data analytical tools, like AI, to help analyze KPIs related to ESG and to determine business impact

– With a regulatory environment as of yet unsure how to approach ESG, many clients need help managing future risks, and Innovative professional service providers are helping clients “future-proof” by  developing 2-3-year roadmaps that consider regulatory and environmental changes

While the ESG regulatory landscape continues to evolve, specifically among the environmental elements of ESG, it is dawning on clients that they will likely be held accountable by regulators, shareholders, and their own customers and employees in the future for how they approach ESG today. As detailed in the report, Innovators in 2023 focus on risk mitigation and optimizing opportunities, helping clients build long-term value.

In this three-part Law.com Compass Pacesetter Research series on ESG, our first 2023-2024 report is on the “E”: Environmental. The Pacesetter Advisory Council assessed dozens of providers to arrive at twenty-four Innovators recognized for their ability to help clients navigate an increasingly complex market environment. The research and analysis also provide insights into the competitive dynamics and service delivery trends driving convergence across legal, management consulting, multi-service, environmental engineering, technology, and insurance providers.

In this report, Law.com Compass Pacesetter Research evaluates the innovation in ESG: Environmental capabilities and offerings of the following providers: Allianz, Anthesis, Arup, AXA XL, Bain & Company, Beveridge & Diamond, BDO, Boston Consulting Group (BCG), Capgemini, Clifford Chance, Deloitte, DLA Piper, EY, FTI Consulting, Gallagher, Garrigues, GEP, GHD, Korn Ferry, KPMG, Langan, McKinsey & Company, Paul Weiss, PwC

Law.com Compass Pacesetter Research provides independent, objective research to providers and buyers of professional services and practical insights that inform decision-making processes.

To learn more about the research or to obtain the full version of the ESG: Environmental report, go to: https://www.alm.com/intelligence/pacesetter-research-2/esg-environmental/.

For more information or the full version of the ALM Intelligence Pacesetter Research series, visit https://www.alm.com/intelligence/pacesetter-research/.

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