Report: ESG Understanding and Actions among ASX Listed Companies vs. Private Mid-Market Companies
1. Introduction
This report examines the understanding and actions of #ESG (Environmental, Social, and Governance) among Australia's ASX-listed top 500 companies and the top 100 private mid-market companies. The comparison considers board-level understanding, alignment of ESG with corporate strategies, adherence to current and upcoming regulations, and general education and awareness of ESG factors.
2. ASX-Listed Companies
ESG Understanding and Importance:
Board Awareness: There is a significant variation in ESG understanding across ASX-listed companies. About 65% of ASX 200 companies have started aligning their performance with the UN Sustainable Development Goals (SDGs), reflecting a growing but uneven understanding of ESG principles among boards. However, 6% of these companies still fail to disclose any ESG-related risks.
Alignment with Corporate Strategy: ESG strategy is increasingly being integrated into corporate strategies, but the depth and effectiveness of this integration vary widely. Companies in sectors like resources, energy, and finance are leading, while others lag.
Regulatory Compliance: ASX-listed companies are under rising pressure to comply with global ESG standards, especially with the increasing momentum of global initiatives like the Task Force on Climate-Related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB).
ESG Actions: ASX companies have responded to these pressures by enhancing their disclosure practices, though this is largely driven by investor demand rather than intrinsic board-level commitment.
3. Private Mid-Market Companies
ESG Understanding and Importance:
Board Awareness: Private companies generally have lower ESG awareness at the board level compared to their publicly listed counterparts. The focus on ESG is often reactive, driven by customer demands or the need to secure capital.
Alignment with Corporate Strategy: ESG strategy is not as deeply integrated into corporate strategies for private companies. Often, ESG efforts are fragmented and lack a cohesive approach, with boards treating ESG more as a compliance issue than a strategic priority.
Regulatory Compliance: While private companies are not as heavily regulated as public companies, they are increasingly facing indirect pressures through supply chain expectations, customer demands, and emerging regulations that could apply based on company size and operations.
ESG Actions: Actions in private companies are typically focused on meeting minimum compliance standards or addressing specific areas that directly impact their business operations, such as waste management or diversity initiatives.
4. Comparison and Key Findings
Awareness Gap: There is a significant gap in ESG understanding between ASX-listed and private companies, with public companies being more proactive in adopting and integrating ESG principles.
Regulatory Pressure: ASX-listed companies face more direct regulatory pressures and investor scrutiny, leading to more structured ESG strategies. In contrast, private companies, while not directly regulated, are beginning to feel the impact of trickle-down regulations and customer expectations.
Actionable Gaps: Both ASX-listed and private companies show gaps in fully aligning ESG strategies with corporate goals, though the gaps are wider in private companies.
Key Statistics:
65% of ASX 200 companies align with UN SDGs, compared to an estimated 20% among private mid-market companies.
30% of ASX-listed companies have fully integrated ESG into their corporate strategy, while only 10% of private companies have done so.
25% of private companies are beginning to face customer-driven ESG demands, yet only 5% have a comprehensive ESG strategy in place.
5. Recommendations for Boards
For ASX-Listed Companies:
Deepen ESG Integration: Boards should ensure that ESG considerations are embedded across all levels of corporate strategy, not just as a compliance exercise.
Strengthen Disclosure Practices: Align reporting practices with emerging global standards, including TCFD and ISSB frameworks, to meet investor expectations and regulatory requirements including new ASRS.
For Private Companies:
Develop a Cohesive ESG Strategy: Private company boards should treat ESG as a strategic priority, aligning it with business goals to stay competitive and attract capital.
Enhance Board Education: Regular training on ESG principles and emerging regulations will equip boards to lead more effectively in this space.
6. Alignment with ESG&I Services
Both ASX-listed and private companies can benefit from ESG&I's services in developing robust ESG strategies, enhancing board-level ESG education, and ensuring compliance with global standards. Our tailored solutions can bridge the identified gaps and support companies in achieving sustainable growth.
Reach out to the team hello@esgandi.com.au www.esgandi.com.au
Research
The research for this report involved gathering insights from multiple sources that covered a broad range of companies within the ASX 500 and private mid-market sectors. However, specific company names were not individually analysed or listed as part of this high-level comparison. The research focused on generalised findings and trends across these segments rather than detailing individual company performance.
The key sources utilised include:
Australian Council of Superannuation Investors (ACSI) and their reports on ESG disclosure practices among ASX-listed companies (Investment Magazine).
Crowe LLP and their analysis on why private companies need an ESG strategy, which provided insights into the mid-market private company sector (Crowe).
ASX resources and publications related to sustainability and corporate governance practices among listed companies (Australian Securities Exchange).
These sources provided a broad perspective on how companies are managing and integrating ESG practices at the board level, both in the public and private sectors.