Most Middle-Market CFOs Believe ESG Strategy Will Improve Financial Growth

According to a new survey from professional services firm BDO, about two-thirds of middle-market CFOs think implementing an environmental, social and governance (ESG) plan will benefit financial performance in the long term.

“Expectations of business have changed,” BDO said in a report of the survey. “In 2022, simply abiding by the rules is no longer good enough. Stakeholders of all kinds, including shareholders, want businesses to deliver social and environmental outcomes in addition to financial returns.”

Meeting financial targets will remain a top concern, especially since just 38% of CFOs across all industries that took part in the BDO Middle Market CFO Outlook Survey said their businesses are experiencing strong growth. That’s less than expected, considering 62% said in the survey last year that they expected business to be thriving by now.

Incorporating ESG into growth strategy is “no longer an option,” BDO said, and 64% of CFOs said implementing an ESG plan will help long-term financial success. However, 36% said a sustainability strategy will be pursued in 2022 even though nearly all CFOs said their business has at least one stated ESG objective for 2022.

Christopher Tower, ESG strategy and services leader, said CFOs need to adapt from usual cost-benefit analysis to a different decision-making framework. Many CFOs still look at ESG as a “public-relations play.”

“Strategies to create long-term value may mean making upfront investments today that will result in greater cost optimization and better financial performance tomorrow,” Tower said in the report.

Looking at other survey results, 84% of CFOs consider supply chain disruption the most significant or moderate risk followed by risks such as talent shortage, tax reform, data breach, economic volatility, and a COVID-19 resurgence.

“Supply chain moves are seldom made with a short-term lens, and so some businesses may be hesitant to make major shifts until uncertainty abates,” BDO said. “But it would be a mistake to view supply chain disruption and soaring prices as transitory.”

Topics Trends Commercial Lines Business Insurance