Business leaders are shifting from a compliance-driven approach to environmental, social and governance (ESG) strategies as they realise the competitive growth value ESG can deliver to the organisation.
While reporting on sustainability data remains a regulatory obligation in many regions, treating ESG as an isolated function or a reporting task owned only by sustainability teams is increasingly viewed as a risk to the business, as it fails to address growing demands from clients, investors and staff.
Companies that balance purpose and performance tend to outperform in the long run. As such, businesses have begun making ESG part of board-level discussion and business planning, integrating the metrics and data that truly matter to the operation into their growth strategies and daily business activities.
When embedded into risk management, capital allocation and operational strategies in this way, ESG strengthens the long-term health of the business and prepares companies to respond to global shifts such as climate regulation or social equity demands.
Unsurprisingly, 25% of global business leaders polled ranked a revised or new sustainability strategy among their top priorities for the next three to five years in the 2025 Forvis Mazars C-suite Barometer, as they increasingly view ESG as a value enabler that delivers a competitive advantage, rather than just a regulatory compliance box-ticking exercise.
Nowhere is this more apparent than in company supply chains, where ESG is becoming a market access requirement and a lever for reputational strength and investor confidence, shifting it from a purpose-driven to a strategic function.
Traditionally viewed as the weakest link in the ESG chain, suppliers are now taking centre stage as stakeholders demand transparency and accountability throughout the procurement process.
For example, procurement teams in large companies, particularly in Europe, now require net-zero plans within supply chains to meet corporate sustainability reporting directive mandates.
These requirements can materially affect an African company’s ability to conduct business with the region’s main trading partners, which is shifting the needle for the Global South regarding sustainability reporting.
When noncompliance threatens to shrink a company’s market access, it becomes an urgent matter that requires executive-level intervention and ownership. For large corporations, the challenge lies in extending ESG standards beyond their immediate sphere of influence.
While they may have control over internal operations, managing the ESG performance of third-party suppliers presents a formidable task. This is particularly true for smaller suppliers, which may lack the resources or awareness to address sustainability concerns.
Nevertheless, failure to address supply chain ESG risks not only undermines a company’s ESG credentials but exposes it to regulatory and reputational risks. Consequently, it is not only a matter of compliance but also a strategic imperative for long-term success.
Addressing sustainability in the supply chain has become a strategic imperative because it is the most complex and costly part of the equation. For instance, governance must now incorporate oversight aspects in sustainability, addressing critically important issues regarding the culpability of management and their fiduciary duties.
As such, C-suite leaders need to address the priorities and tackle underlying challenges by creating controls regarding how robust their ESG data points are, focusing on what is most relevant to the business and its stakeholders.
While many companies follow a process to finalise a report they are obligated to create, businesses need a plan for how they will collect this data, and how they can improve and better automate the process.
This process starts with building a roadmap that executives can improve year on year, ensuring companies start reporting on the ESG data that has a direct and lasting impact on the company.
In this regard, prioritising materiality is key because not every data point related to sustainability carries equal weight. However, the ESG data that matters should have the same quality controls and importance as financial data.
By measuring financial and ESG key performance indicators and aligning teams regarding shared goals, executives can create purpose-led companies that support profitability and impact.
As such, custodianship for sustainability must move from technical teams to the C-suite, with the CFO tasked with taking accountability for this function and its reporting.
This shift is also becoming mission-critical as the reporting requirements of international financial reporting standards continue to evolve, aligning more closely with European standards, and become applicable beyond listed businesses through changes to the Companies Act.
In this regard, local CFOs or CEOs should start the ESG transformation journey by aligning ESG goals with business outcomes, building cross-functional teams and facilitating interdepartmental collaboration by involving finance, risk, HR, procurement and operations in the process.
Through this process business leaders need to focus on building credibility, getting the data right, using external assurances where needed, and communicating transparently.
By doing so, businesses can successfully move ESG from the periphery to the forefront of decision-making, and CFOs can start to understand how sustainability is delivering material performance improvements for the business.
• Mbunge is partner for sustainability services at Forvis Mazars SA.
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