ESG

gets real
But can
businesses
keep up?
The debate about
whether to focus on ESG
and Sustainability is over.
But while businesses talk a good game about urgency,
their actions lag behind. Even five years from now, one
quarter of executives from the World’s Most Admired
Companies and one third of those from peer companies
do not think their ESG (environmental, social and
governance) models will be fully fine-tuned.

Can the world afford to wait?

As scrutiny around ESG grows, progress hangs
on an organization’s ability to show its actions
to slow the climate crisis, embrace diversity and
pay more than lip service to the biggest social and
environmental issues facing colleagues, communities,
and the planet.
We predict
growing pains
ahead What does a mature
ESG approach look like?
As part of our yearly partnership with
FORTUNE magazine, we surveyed over The 39% of organizations who said their ESG and
Sustainability models were mature had all:
700 senior execs from the World’s Most
• Defined opportunities to act on ESG goals.
Admired Companies in 2022, as well
• Knew the risks.
as leaders from similar organizations
• Had strategies in place to improve ESG metrics
who came lower in the rankings. across the board.
We had a huge response – a sign that
ESG and Sustainability are top of mind To join them, we recommend developing laser-sharp
for companies across the globe. focus on five areas:
• Purpose
While most businesses are moving • Governance
too slowly, the World’s Most Admired • Leadership & talent
Companies have solid plans to • Operating model
accelerate improvements. • Culture
Here are three ways you can follow their lead
on ESG – or even take the lead yourself

1 2 3
Do it Go big on
Co-own or
on purpose, governance
go home
with purpose
 1
Do it
on purpose,
with purpose
If you want your
business to take
ESG seriously, link
it to your purpose
Purpose was the biggest motivator for 93% of the Most Admired
Companies to prioritize ESG.

It makes sense. Making ESG and Sustainability part of your purpose

gives colleagues, customers, boards, and investors a clear reason
to get behind it – and we mean all of it: the environment, social and
governance elements equally. And it weaves ESG into the fabric of
your culture.

Everyone knows corporate cultures are hard (and slow) to change.

Businesses that connect ESG and Sustainability to their current
purpose will speed up that change.
Reboot your
operating model
Want to know if an organization is genuinely purpose-driven?
Check their operating model.

73% of the World’s Most Admired Companies have already

revised their models to support ESG. That includes everything
from looking at the circularity of their supply chains to make sure
materials are kept in productive use for as long as possible,
to reviewing the equity of their products and services.

“ESG and Sustainability efforts

are no longer one-off initiatives.
Successful leaders have no choice
but to weave them into all areas
of their organizations.
Andrea Walsh, Senior Client Partner
and ESG Solutions Leader.
Create value.
Sustain value.
Putting ESG
in your purpose
is always worth it
Far from being seen as an expense, most of the Most Admired
Companies also said investing in ESG was a way of adding value to
their business. Better reputations boost hires, boost sales, and attract
investors. It’s a great example of focusing on the triple bottom line
being better for the planet, society, and profits.
Know what you
stand for, show
what you stand for
Here are two ways to stress-test ESG and
Sustainability’s place in your purpose.

Answer the
big question: Why?
If you can’t answer why your ESG plans are part of your purpose
and necessary for your business, you have a disconnect that needs
correction. If you don’t know what or who needs to change,
how can you expect to change it?

Got the answer? Then, communicate,

communicate, communicate.
It’s not enough for the board to get behind your purpose –
everyone, including colleagues, suppliers and investors need to hear
it, too. So be loud and clear – repeating and reinforcing your purpose
often. But remember, corporate comms are there to spread the word,
not own the change. That needs to come from your leaders and be
owned by everyone in your organization.
 2
Co-own or
go home
Who owns ESG
and Sustainability?
If your answer isn’t ‘everyone’, it’s time to think about what needs to
change. We spotted a telling trend amongst the World’s Most Admired
Companies. While many had a senior owner for ESG plans, like a Chief
Sustainability Officer, they also had a higher percentage of middle
managers who were ready to turn ESG challenges into tangible actions.

By co-owning ESG initiatives, those middle managers are able to push

change from the heart of the business outwards – which increases
ownership for ESG at all levels.

That said, a small but worrying percentage (around 10%) of organizations

said their comms or marketing team were responsible for ESG –
a potential sign they were more focused on words than action.
Should you
incentivize ESG?
Should you pay leaders more to do the right thing? The short answer is,
‘yes.’ It’s a growing trend that looks set to influence how senior leaders set
their priorities and hold themselves and others accountable.

Five years ago, hardly anyone did it. Today more than 60% of the S&P
500 are incentivizing at least one senior exec that way. And so are the
World’s Most Admired Companies.

Yet very few do this outside of the annual bonus program, and most
attach only a modest weight. Making a more direct and substantive
connection would accelerate change and embed ESG into culture,
with executives strengthening their focus if their pay is tied to it.
Reasons to tie ESG
to executive pay
1. It makes a clear public statement to all stakeholders
that the well-crafted words in the annual report are
sincere and directly reinforced.

2. It provides a greater sense of personal purpose to the

senior executive team if their economic well-being is
meaningfully tied to producing well-being for others.
So they can truly feel they are working together for
something more important than just money.

3. It helps drive superior financial results and long-term

value creation.
Do your people have
what it takes to lead
ESG & Sustainability?
These are the five key qualities of sustainability leaders:

Purpose Courage across Awareness of themselves

Sustainability is a
core part of their identity
and purpose.
Inclusion that multiplies
& beyond & their impact
They are willing to break They understand themselves
the mould and challenge
Integrative thinking well and use this understanding
the status quo. to influence others.

Inclusion that multiplies Integrative thinking

They empower people throughout the organization They understand how their organization
to take decisions with sustainability in mind. is connected to the world around them.
And generate creative solutions that are more than And the collective impact that the organization
the sum of the parts. and its ecosystem have on this.

If you have leaders already thinking like this today, consider how they can influence others more broadly.
If they haven’t, think about borrowing these capabilities through interim leaders or support from external ESG
mentors. And, of course, actively recruit people who can bring the right leadership skills to your organization.
 3
Go big on
governance
Take responsibility
for the things you
commit to
As you mature your ESG and
Sustainability efforts, it’s important to
take responsibility for the things you
commit to – and have the data to back
them up.

The G (or governance) element of ESG is traditionally the least

likely to set pulses racing of the three, but it is important. Like a
force multiplier, you’ll never get the most from your environmental
and social strategies without the right governance. It’s exactly
the reason why investors say the G is their top priority (according
to our latest research)- because it it provides the accountability
framework for the board’s work on material ‘E’ (environmental)
and ‘S’ (social) factors.
The results of ESG
don’t sit neatly on
spreadsheets
We often see organizations leaning towards the things they
can measure – like cutting greenhouse gas or carbon emissions.
And the World’s Most Admired Companies are leading the pack
when it comes to running a sustainable supply chain (72% thought
theirs were industry-leading or, at least, above average).

But how do you measure internal behavior change? How do you

quantify inequity levels or the strength of supplier relationships?
And if ‘E’ is easier to report on than ‘S’, how do you encourage
teams to focus equally on both?

Getting ESG right isn’t just about doing what’s easiest to report.
We all need to work harder to find ways of reporting on the many
qualitative factors that drive the success of ESG.

New regulations are released often. The businesses that get

ahead of them are likely to show the best results. So up your
focus on governance now, or risk falling behind later.
How are you showing action?
Here are key actions every ESG and Sustainability-focused
business should be doing right now:

• Building your board’s capability around ESG and Sustainability, and putting ESG
governance in place.

• Making sure your leaders have the right skills and mindset to drive ESG change.

• Shaping your ESG strategy and plan, focusing on your people.

• Making ESG central to your operating model and organization structure.

• Developing new skills, mindsets and ways of working across your organization.

• Infusing ESG purpose into your culture to reinforce the right behaviors and mindsets.

• Reinforcing your ESG aspirations and goals through executive compensation.

• Championing inclusive talent management and reward practices and programs.

• Communicating effectively with all stakeholders.

There are lots of levers your business can pull to embed ESG. The trick is to be clear on
what you want to accomplish, which depends on your organization’s level of maturity.
Is motivating all your teams a top priority, or just incentivizing leaders?

Are you trying to increase accountability or convince middle managers to co-own

change? Every organization is different.
We’ll find the starting
point that’s right for you
Talk to us and we’ll assess your organization’s ESG maturity against best practice.

Using our diagnostic, you’ll get an integrated perspective of your people and
organizational ecosystem that drives ESG & Sustainability results. You’ll see a
clear view of exactly where you’re at, to work out which levers to pull and to
help you map the path ahead.

We’ll pinpoint your position against the five strategic dimensions of the
framework; risk management, awareness, talent integration, operations
integration, and market integration.

Depending on what we find, we’ll help you plan your next move, whether you’re
restructuring teams, incentivizing them or shaking up your operating model.

ESG has grown up. We’ll help you catch up – and get ahead.

Find out more here.

About the World’s
Most Admired
Companies
Since 1997, we have partnered with FORTUNE magazine to identify
and rank the World’s Most Admired Companies.

The study surveys top executives and directors from eligible companies,
along with financial analysts, to identify the companies that enjoy the
strongest reputations within their industries and across industries –
and how they win these reputations.

Read more on what it is and how it’s done.

This year we also surveyed over 700 senior executives from companies
participating in the WMAC rankings, inviting them to reflect on ESG
and sustainability approaches in their organizations.

The study focused on how they are adapting their people and
governance processes, culture, and operating models to embed
their commitment to ESG and sustainability.

Find out more here.

Get in touch today
kornferry.com/contact

Korn Ferry is a global organizational

consulting firm. We work with our clients
to design optimal organization structures,
roles, and responsibilities. We help them
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on how to reward and motivate their
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