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Bangkok Post
Bangkok Post
Business

Asia-Pacific companies lagging on ESG

Less than 30% of companies in Asia-Pacific incorporate environmental, social and governance (ESG) factors into their goals and key performance indicators, even though more than half of them claim the issue is critical to their long-term success, according to a recent survey.

The report by global consultancy Aon found the majority of firms in the region are still in the early stages of using ESG metrics and developing their ESG profile. The regulatory requirements are still evolving in most of the surveyed countries.

The survey, which was conducted in 2022, shows that public companies are twice as likely to have clearly defined ESG metrics and link them to corporate performance than privately held companies, with 50% of listed firms having a separate ESG function or team.

Simon Kennedy, partner and head of people solutions for Australia at Aon, said ESG targets need to be as measurable as financial targets, preferably using audited numbers based on established standards.

"The first step is to align ESG targets with business strategies and goals. Companies can retain their existing measures, no matter how simple, and enhance them as they move forward," he said.

Boon Chong Na, advisory partner and corporate governance and ESG lead at Aon's Human Capital Solutions for Asia-Pacific, said incorporating ESG performance criteria into executive compensation plans meant ESG metrics were more likely to align with a company's overall strategy and compensation plans.

According to Aon, 61% of respondents said they involve their entire board in decisions that concern ESG, yet 41% do not have a formal process or training programme in place to educate board members regarding contemporary ESG topics.

"Among surveyed participants, most companies currently conduct only one or two education sessions on ESG per year for their boards," said Mr Kennedy.

"Whilst directors are expected to be deeply involved in developing and overseeing ESG strategy, training is required to ensure board members are adequately informed and capable of making sound judgements about the ESG risks and opportunities."

The report found nearly one-third of surveyed companies are looking to introduce or expand ESG roles, with 76% of positions being hired at the mid-professional level.

The International Labour Organization forecasts 14 million green jobs will be created in Asia-Pacific by 2030.

"In Asia-Pacific, companies around the region are taking steps to improve their performance on ESG, either to become more attractive to investors or as an aspirational endeavour unrelated to regulatory requirements," said Mr Kennedy.

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