CEOs cite consequences of not meeting expectations related to ESG

By Bryan Strickland

Much of the discussion surrounding ESG disclosures has focused on reporting requirements and calls from potential investors for reliable information.

Organization leaders, however, have a couple of other considerations top of mind.

Asked to identify the biggest downside of failing to meet ESG expectations, CEOs most often cited "higher cost of and/or difficulty in raising finance" and "recruitment challenges" in the KPMG 2022 CEO Outlook survey.

Those concerns ring true to panelists in a recent ESG workshop during CPA Summit 2022, a virtual event hosted by the Maryland Association of Certified Public Accountants.

"For us, as the biggest bank in the country from an assets perspective, ESG matters are very important, a very important consideration in how we do business," panelist Jose Colon said.

Colon, who is vice president, SBA Solutions Group for JPMorgan Chase, said ESG has become a notable consideration in some of the bank's lending practices.

"There's a public purpose component that we look at when we look to lend to the companies in our government-backed space," he said. "For example, one of the questions that we often ask associated with perhaps a $10 million credit ask is, 'How many new jobs are being created as a result of the federal government involvement in this $10 million credit facility?'

"It's not just looking at the traditional ratios that we look at."

During a recent "Future of Finance" panel discussion at AICPA Council, attendees identified "finding and retaining talent" as the top concern facing their company.

Twenty-two percent of CEOs in the KPMG survey named "recruitment challenges" as the biggest downside of failing to meet ESG expectations, second only to financing concerns (25%).

The link drawn by CEOs between implementing ESG and hiring talent comes as no surprise to Ami Beers, CPA, CGMA, senior director–Assurance and Advisory Innovation at the Association of International Certified Professional Accountants, representing AICPA & CIMA.

"When you speak to the younger generation, they are incredibly interested in this topic," she said. "Many will make decisions about where they work, where they buy their products, and how they live their lives, based on sustainability concerns and whether those organizations are actively making a difference.

"They want to work for companies that demonstrate that they have done something in this area. This generation will prioritize purpose over profit. They want to work for organizations that focus on sustainability as part of their business strategy, and they are attracted to companies whose values align with their own and where they feel that they can contribute to social and environmental issues."

While the KPMG survey featured 1,325 CEOs in 11 jurisdictions across 11 industries, Beers spoke specifically to how a strong strategy that includes ESG could help the accounting profession bridge the talent gap.

"In terms of when firms are reaching out to do their hiring, that they have these policies themselves in place — that's really important," she said.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.

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