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September 8, 2021updated 31 Aug 2021 4:32pm

One third of mid-market risk losing business if they fail to act on ESG

By Zoya Malik

Almost one third of mid-market businesses say they face a high risk of losing business if they fail to act on ESG, according to a new survey from accountancy and business advisory firm BDO.

When asked to think ahead to the next five years, almost one quarter (24%) of respondents said there was a ‘high’ risk, and 7% said there was a ‘very high’ risk of losing business or losing the eligibility to bid for new business if they failed to meet acceptable ESG standards. However, 36% said the risk was ‘low’ and 6% judged there was no risk at all.

The new figures suggest that ESG considerations are moving up the agenda for mid-market businesses. Indeed, when asked about their top business priorities, 38% of business leaders ranked meeting ESG criteria as their highest priority. This was higher than those citing adapting to post-Brexit challenges (36%) and recovery from COVID-19 (25%).

With the start of COP26 just weeks away, many mid-market companies appear to be particularly focused on improving their environmental performance.

When asked about new environmental commitments made in the last 12 months, 32% said they had ringfenced budget for green initiatives and 28% said they had set carbon reduction targets for the next 3-5 years. In addition, 26% said they had introduced measurable policies to reduce their carbon footprint and one quarter (25%) said they had pledged to become net zero or carbon neutral.

Encouragingly, fewer than 1% of respondents said they hadn’t planned any environmental measures at all.

Matthew White, BDO Senior Partner and Chair of the firm’s ESG Executive Committee, said: “While the pressure to improve ESG performance has to date focused on the large polluters, big financial institutions and publicly listed companies, we are now seeing a trickle-down effect with ESG now firmly on the board agenda at mid-market level.

“This reflects a growing awareness and acceptance among many mid-market business leaders of the responsibilities they have to their employees, to stakeholders and to wider society. Many are also waking up to the reality that failing to take ESG seriously could have serious commercial consequences.

“With COP26 just around the corner, the world’s attention will focus on efforts to limit the global temperature rise to below 1.5˚C. In this context, it is encouraging to see so many mid-market firms taking action to reduce their environmental impact, but globally emissions will need to be halved over the next decade so there is still much more to do.”

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