1、ESG RADAR 2023|1 External Document 2022 Infosys LimitedESG RADAR 2023ESG REDEFINED:FROM COMPLIANCE TO VALUE CREATIONContentsExecutive summary 4ESG is a moneymaker 6Difficult path ahead 9Spend money on ESG to make money 9Overlooking the S and G in ESG hurts profits 11Social pays off 14ESG leadership

2、must come from the top 15Companies focus on the most obvious ESG efforts but not always whats best financially 16ESG underrepresented in the C-suite 18Struggles with S and G impact 19Supply chain hurdles on the horizon 20ESG:The new backbone of business 21Companies expect ESG to pay off in the futur

3、e.But why wait?231.Treat ESG as a value creator,instead of a cost center 252.Customers are important but prioritize employees in ESG efforts 263.Embed ESG accountability in the leadership ranks to improve profits 274.Transparency matters:Share ESG requirements and data throughout your supply chain 2

4、8Appendix:Research approach 30References 32ESG RADAR 2023|3 External Document 2022 Infosys Limited 4|ESG RADAR 2023External Document 2022 Infosys LimitedExecutive summaryESG RADAR 2023|5 External Document 2022 Infosys LimitedESG goals are no longer nice to have:They are business necessities.The valu

5、e of ESG investment assets is projected to reach$53 trillion by 2025,one-third of global assets under management.1 To tap into this growing pool of money,businesses increasingly need to show investors that they have low ESG risks.Concerns about greenwashing will also pressure firms to prove their co

6、mmitment to become more responsible corporate citizens through internal investments and metrics that back up their results.However,companies often are uncertain about how much to invest in ESG and where to focus their efforts.These forces combine to encourage,or even insist,that companies act quickl

7、y to become more responsible enterprises.If businesses dont set ESG priorities and act on them,they risk alienating their customers,investors,employees,or all of the above.Companies also cant afford to start initiatives that might drag down financial performance,particularly as an economic downturn

8、seems more likely.Bad choices now can waste a companys time and money,and still leave them far from their ESG goals.Pressure from the edges is pushing companies into a mature middle,where traditional business interests and ESG need to coincide and even amplify each other.The Infosys Knowledge Instit

9、utes ESG Radar examines the changes companies are making and must make to achieve their ESG goals,whether that is to become a more responsible corporate citizen or lower ESG risks.ESG is a moneymakerOur global survey of more than 2,500 business executives and managers found that contrary to claims b

10、y some critics spending on ESG correlates with higher profits.Ninety percent say they had moderate to significant returns,and none of the companies surveyed reported losses from their ESG efforts.Even so,companies tend to focus more on the brand benefits than on other financial outcomes and are not

11、investing enough on changes needed to meet their ESG goals.Overlooking the S and G in ESG hurts profitsCompanies focus their efforts mostly on the E,or environmental,portion of ESG.This is no surprise since many businesses have committed to carbon neutrality,net zero,or at the very least,to substant

12、ially reduce their greenhouse gas emissions.These are valuable initiatives,but our study found that a greater focus on social and governance,such as having more women on the board and restructuring leadership,correlates with better financial outcomes.Companies focus on the most obvious ESG efforts b

13、ut not always whats best financially Firms have started to adjust their core business and encourage a greater focus on ESG throughout the workforce.However,many of these commonsense changes dont seem to make a significant financial impact.The companies with better profit growth are the ones that pla

14、ce responsibility for ESG at the highest levels and also diversify their board.Recommendations:Companies expect ESG to pay off in the future.But why wait?Businesses often think of ESG as a brand priority and a long-term investment that will one day combine the bottom line and real-world impact.But c

15、ompanies dont need to wait:Short-term financial benefits are available now.The following actions can accelerate more of ESGs financial rewards.1.Treat ESG as a value creator,instead of a cost center.2.Customers are important but prioritize employees in ESG efforts.3.Embed ESG accountability in the l

16、eadership ranks to improve profits.4.Transparency matters:Share ESG requirements and data throughout your value chain.To succeed and sustain,ESG initiatives must eventually contribute to the bottom line.The right strategy now will allow businesses to reach that financial tipping point sooner and wit

17、h a greater long-term payoff.6|ESG RADAR 2023External Document 2022 Infosys LimitedESG is a moneymakerESG RADAR 2023|7 External Document 2022 Infosys LimitedThe emphasis on various ESG priorities increased dramatically during the pandemic as social issues moved to the forefront and the world saw how

18、 slowing economic activity reduced greenhouse gas emissions.2 Simultaneously ESG investments boomed or at least held their own as the global economy struggled.Now,the inevitable ESG blowback has arrived.Prominent voices call ESG investing well-intentioned but deeply flawed,and suggest that companies

19、 should focus exclusively on the traditional bottom line and deprioritize ESG,or at least some elements of it.3 Despite this pushback,many customers and investors are still pressuring companies to embrace ESG and integrate the principles into their enterprises.Our study found that companies are moti

20、vated more by how ESG initiatives affect their reputation,rather than how these efforts will boost the bottom line(Figure 1).Although the difference is narrow,it is surprising since financial benefits are the standard driver of business decisions.Still,brand value certainly offers financial benefits

21、 to companies that are able to cultivate and maintain a reputation for quality,innovation,exclusivity,or even ethics.That might be enough for now since the current approach seems to be effective,although not necessarily optimized.Figure 1.Financial benefits are not ESG top prioritySource:Infosys Kno

22、wledge Institute Its clear that a focus on ESG goals can boost returns:90%of our respondents from eight regions and a dozen industries say their ESG initiatives have produced either moderate or significant returns(Figure 2).The remainder,10%,say their efforts broke even.None reported losses from the

23、ir ESG work,which suggests that companies have adopted a careful,targeted strategy that prioritizes short-and medium-term efforts with the most certain returns.Figure 2.Beyond branding,ESG delivers financiallySource:Infosys Knowledge Institute Most companies surveyed realized positive financial retu

24、rns from their ESG efforts within a few years(Figure 3).The largest group(41%)report ESG returns in a two-to three-year window.Fewer than one-third say that it took longer to break even on their ESG investments.These timelines generally match what companies expect from technology investments that su

25、pport their sustainability efforts.The book“Practical Sustainability:Circular Commerce,Smarter Spaces and Happier Humans,”written by Infosys executives Jeff Kavanaugh and Corey Glickman,concluded that business leaders expect to see 25%annualized ROI in three to five years.4 The payback is even faste

26、r on facility retrofits that are intended to optimize energy usage.For those projects,returns are possible in one to two years.The ROI also depends on the internal calculations.If a sustainability project is intended to reduce greenhouse gas emissions,the math will vary greatly since different compa

27、nies price carbon differently.The complexity of the calculations is also a factor.Straightforward projects ones dealing with energy,water,and buildings offer easy-to-measure data and cost savings.Other models are more complicated when they deal with ESG efforts that stretch throughout the value chai

28、n.Financial benefitsImpactReputation303436ESG motivations proportion(100 points)0%Negativereturns10%No noticeablereturns29%Financial returns for ESG initiativesSignificantpositive returns61%Moderatepositive returns90%8|ESG RADAR 2023External Document 2022 Infosys LimitedFigure 3.ESG initiatives deli

29、ver ROI within 3yearsSource:Infosys Knowledge Institute These positive financial results will please the C-suite and stockholders.However,the returns are also likely to generate some skepticism about the goal of ESG efforts.Articles from Bloomberg and Harvard Business Review have been critical of ES

30、G investing as a trend that offers financial windfalls but skimps on the impact.5,6Most of our respondents are confident that their ESG efforts have a long-term positive impact on people,planet,and profit author and entrepreneur John Elkingtons classic triple bottom line.7 The greatest confidence wa

31、s in the governance initiatives(81%).Environmental and social efforts were both about 70%(Figure 4).Figure 4.Companies are confident in the impact of ESG initiativesSource:Infosys Knowledge Institute“The nature and scale of the challenges that we face are not going to be solved if we simply trade of

32、f.For example,the triple bottom line is about economic,social,and environmental value added.Very often people do run an equation which results in one of those forms of value being suppressed or actually going into reverse.Were basically saying unless and until we can integrate all of this into real

33、world solutions,this is not going towork.”John ElkingtonCo-founder and chief pollinator,Volans Timeline for financial ESG returns4%16%25%8%46%1 year1-2 years2-3 years3-5 years5-10 years66%Highly confident in ESG initiatives impactSocialEnvironmentalGovernance68%71%81%ESG RADAR 2023|9 External Docume

34、nt 2022 Infosys LimitedDifficult path aheadSpend money on ESG to make money Its getting harder for companies to stand out from the crowd when it comes to corporate responsibility.Businesses that promote their ESG credentials put more pressure on their peers to do the same,which creates a feedback lo

35、op.ESG starts as a differentiator for many firms and then turns into an expectation:the ceiling becomes the floor.Businesses need to find new ESG strategies to differentiate themselves from their competitors,as George Serafeim of Harvard and Ioannis Ioannou of the London Business School determined w

36、hen they analyzed 4,000 companies globally.Their findings were that ESG practices“converged”from 2012 to 2019.8 Also,despite the financial windfall from the ESG investing boom,there are also medium-to long-term threats ahead many of them internal.9 Companies risk derailing their financial progress t

37、hrough overly conservative budgeting,especially as they brace for economic tough times ahead.Our analysis found that a 10 percentage point increase in ESG spending correlates with a 1 percentage point increase in profit growth.In other words,a company that currently spends 5%of its budget on ESG cou

38、ld expect a 1 percentage point profit increase if it were to increase ESG spending to 15 percent.The relationship between ESG spending and the bottom line is a complex one with many interconnected factors that can influence revenue and profits:customer loyalty,employee engagement,cost of capital,cos

39、t savings,reputation,and risk reduction.Despite the clear link with profit growth,requests for budget increases are likely to be an obstacle in the current economy.Consistently high rates of inflation(a projected 8.8%globally this year)have backed many companies against a wall.10 A Gartner survey of

40、 chief financial officers found that companies were running out of room to raise prices.11 Firms were instead counting on cost reductions and automation to close a growing financial gap.Source:Infosys Knowledge InstituteFigure 5.Financial concerns hinder companies from starting ESG initiativesRespon

41、dents listing item as a top deterrent84%Budget required is too much83%Uncertain about investment required71%Uncertain if there is an ROI70%Uncertain about ROI timeline63%Do not have the right technology55%Senior management does not support48%Lack of standardized reporting ormeasurement systems47%Poo

42、r change management 10|ESG RADAR 2023External Document 2022 Infosys LimitedWhen asked to identify barriers to starting new ESG initiatives,money was the dominant theme.These executives and managers say that their most pressing concerns include the size of the budget required,the timeline for a retur

43、n on investment(ROI),and questions about even whether there is an ROI(Figure 5).There are similar concerns about how lack of investment will affect companies progress toward existing ESG goals.A larger budget for ESG initiatives is the third-most-important change needed to achieve these goals,accord

44、ing to respondents(Figure 6).Recent research,however,indicates that ESG wont be spared from spending cuts.A KPMG survey of CEOs found that 59%plan to“pause or reconsider”their ESG efforts in the next six months.12Figure 6.Companies need structural changes and more budget to achieve ESG goalsSource:I

45、nfosys Knowledge InstitutePercentage of respondents ranking an item as a top 5most significant change needed to achieve ESG goals38%30%28%20%19%14%10%8%6%6%5%Organizational structureOperating modelBudget for ESG initiativesBusiness modelMore data on impactof ESG initiativesMarketplace changesConsume

46、r behaviorDevelop partnershipsor consortiumsCompany cultureTechnology innovationsStandards from businessgroups,NGOs,or regulatorsESG RADAR 2023|11 External Document 2022 Infosys LimitedOverlooking the S and G in ESG hurts profits 12|ESG RADAR 2023External Document 2022 Infosys LimitedESG features th

47、ree important and sometimes overlapping subjects.They are not always prioritized equally.The United Nations Paris Agreement and its predecessors elevated the environment to the top of many corporate agendas.More than one-third of the worlds largest publicly traded companies have net-zero targets,and

48、 thousands more are taking steps to reduce their emissions.13,14Our survey found that businesses now prioritize environmental initiatives over“S”and“G”efforts although only by a small amount(Figure 7).Social was a slightly above average priority,potentially a reflection of the greater emphasis on so

49、cial responsibility during the pandemic.15 Figure 7.Companies more often focus their ESG efforts on the environmentSource:Infosys Knowledge InstituteCompanies are also more likely to track environmental metrics,such as carbon footprint,wastewater recycling,and water usage although cybersecurity(gove

50、rnance and social)and training by gender(social)were also frequently measured(Figure 8).16 Companies often find it easier to reach a consensus on the goals for environmental metrics,particularly businesses that have committed to net zero.In that case,the finish line is obvious.There is often less ag

51、reement on setting optimal social and governance goals,even if some metrics are easy to track.There is no argument about the importance of environmental efforts,particularly as we move toward multiple climate change tipping points.17 Still,our research found that there are costs to overlooking the s

52、ocial and governance elements of ESG.A greater focus on those two areas is correlated with better financial outcomes,according to Infosyss analysis.303436ESG motivations proportion(100 points)SocialEnvironmentalGovernance“Diversity done right is not a routine compliance exercise that demands little

53、more than ticking boxes.When you bring people with different backgrounds and life experiences into your decision-making process,you get new and varied perspectives.This helps you make smart choices,avoid costly missteps,and open your enterprise to greater innovation.”Mohit JoshiPresident,InfosysESG

54、RADAR 2023|13 External Document 2022 Infosys LimitedFigure 8.Companies are more likely to track environmental metrics compared to S and GSource:Infosys Knowledge Institute73%70%60%60%59%58%57%57%56%56%54%54%53%53%52%51%47%ESG metrics trackedWastewater recyclingCarbon footprintTraining by genderWater

55、 useCybersecurity incidentsPercent of workforce trained on cybersecurity policiesWaste entering landfillsEmployee satisfactionCommunity investmentPercent of workforce that is womenPercent of accessibility compliant digital assetsAnnual confirmed corruption incidentsParticipation rate of employeesati

56、sfaction surveysPercent of workforce trained onanti-corruption policiesEmployee resource group participationEmployees trained or reskilledLGBTQIA+inclusionGovernanceEnvironmentalSocial 14|ESG RADAR 2023External Document 2022 Infosys LimitedSocial pays offOur analysis found that a pair of well-regard

57、ed social initiatives were correlated to better financial performance.An increase in the number of women on a companys board and a greater employee focus related to ESG efforts were linked to higher profit growth.Women are a minority on three-quarters of our respondents boards,but those with a highe

58、r proportion excelled financially.A 10 percentage point increase in women on the board strongly correlates with a 1 percentage point increase in profit growth.Of those we surveyed,the average percentage of women on the board of directors was 41%(Figure 9).A more representative board is typically ass

59、umed to have a greater diversity of ideas.Figure 9.Women are underrepresented on company boardsOur findings add another data point to what is already a mixed picture on this subject.A peer-reviewed 2017 meta-analysis by Katherine Klein,a management professor at the University of Pennsylvanias Wharto

60、n School,found no correlation between women on the board and financial outcomes.18 However,a 2021 academic study examined companies in the S&P 500s information technology sector and found a positive correlation to price-to-earnings ratio,but not other financial metrics.19 And student research at the

61、 University of Pennsylvania looked at women on the boards of Indian companies and found a positive impact on return on invested capital.20Among the companies surveyed by Infosys for ESG Radar,the percentage of women on the boards was higher than what is found in other surveys.Recent research from Mo

62、odys Investors Service says the average for North American and European companies is 29%,an increase from two years ago when it was 24%.21 This disparity suggests that these are more ESG-focused companies in our sample,which could have been a factor in our results.Those numbers will inevitably incre

63、ase in the medium-term.Various stakeholders are demanding a more balanced corporate board,whether its seeking significant representation or ensuring that women are not completely shut out.The European Union has reached a provisional agreement to require women to make up 40%of nonexecutive director p

64、ositions and one-third of all board positions.22 And BlackRock and State Street shareholders have used their financial might by voting against directors reelection when the board is all male.23Our analysis also indicates that companies report greater profit increases when their ESG efforts are motiv

65、ated by how their employees view them,as compared to reputation among customers and other stakeholders.These benefits could be a result of greater success in recruitment and retention or better engagement among employees.Source:Infosys Knowledge Institute4%$5 billion 32|ESG RADAR 2023External Docume

66、nt 2022 Infosys LimitedReferences1.ESG assets may hit$53 trillion by 2025,a third of global AUM,Adeline Diab and Gina Martin Adams,February 23,2021,Bloomberg.2.Emission reductions from pandemic had unexpected effects on atmosphere,November 9,2021,Jet Propulsion Laboratory.3.ESG should be boiled down

67、 to one simple measure:emissions,July 21,2022,The Economist.4.The practical guide to unlocking the$2.5 trillion business boom,2022,Infosys Knowledge Institute.5.The ESG mirage,Cam Simpson,Akshat Rathi,and Saijel Kishan,December 10,2021,Bloomberg.6.ESG investing isnt designed to save the planet,Kenne

68、th P.Pucker and Andrew King,August 1,2022,Harvard Business Review.7.John Elkington on the emergent future of sustainability,August 20,2020,Infosys Knowledge Institute.8.Social-impact efforts that create real value,George Serafeim,September-October 2020,Harvard Business Review.9.The case for ESG inve

69、sting as flows boom in 2022,April 14,2022,Nasdaq.10.Countering the cost-of-living crisis,October 2022,International Monetary Fund.11.Gartner survey shows significant rise in number of CFOs planning cost cuts due to inflation,May 19,2022,Gartner.12.KPMG 2022 U.S.CEO Outlook,2022,KPMG.13.Net Zero Stoc

70、ktake 2022,June 13,2022,Net Zero Tracker.14.Science Based Targets.15.Corporate social responsibility:business responses to coronavirus(COVID-19)pandemic,Appel Mahmud,Donghong Ding,and Md.Morshadul Hasan,January 22,2021,SAGE Open.16.Cybersecurity is an environmental,social and governance issue.Heres

71、why,Anna Sarnek and Cristina Dolan,March 1,2022,World Economic Forum.17.Exceeding 1.5C global warming could trigger multiple climate tipping points,David I.Armstrong McKay,Arie Staal,Jesse F.Abrams,et al.,September 9,2022,Science.18.Does gender diversity on boards really boost company performance?,M

72、ay 18,2017,Katherine Klein,Knowledge at Wharton.19.Does board gender diversity affect firm performance?Empirical evidence from Standard&Poors 500 information technology sector,Liliana Nicoleta Simionescu,tefan Cristian Gherghina,Hiba Tawil,et al.,July 1,2021,Financial Innovation.20.Do women on corpo

73、rate boards impact financial performance?A study of Indian firms,Stephanie Wu,2022,University of Pennsylvania.21.More women in the boardroom could drive higher credit ratings and stock returns for firms they still hold just 29%of seats,Yun Li,March 11,2022,CNBC.22.EU breaks deadlock to improve repre

74、sentation of women on boards,Susannah Donaldson,July 5,2022,Pinsent Mason.23.The Big Three and board gender diversity:The effectiveness of shareholder voice,Todd A.Gormley,Vishal Gupta,and Sandra Mortal,December 30,2020,Harvard Law School Forum on Corporate Governance.24.How sustainable supply chain

75、s are driving business transformation,Rae-Anne Alves and Glenn Steinberg,September 20,2022,EY.25.Digital Radar 2022,Jeff Kavanaugh,Chad Watt,and Nikki Seifert,2022,Infosys Knowledge Institute.26.What is a circular economy?,United States Environmental Protection Agency.27.A call for accountability an

76、d action:A Deloitte Global 2021 millennial and Gen Z survey,2021.28.U.S.enterprise worker survey shows sustainability at work trends and forecast,August 30,2022,Adobe.29.Human Resources Management,2011,University of Minnesota Libraries.30.Employee turnover costs more than you think,Angie Basiouny,Au

77、gust 2,2022,Knowledge at Wharton.31.Christopher Marquis on B Corp movement,October 2,2020,Infosys Knowledge Institute.32.Inclusive design:Diverse voices lead to products that work for everyone,Kurt Schafer,Madeleine Roberts,and Jeff Mosier,September 27,2022,Infosys Knowledge Institute.33.ESG governa

78、nce:Board and management roles&responsibilities,Jurgita Ashley and Randi Val Morrison,November 10,2021,Harvard Law School Forum on Corporate Governance.34.A more sustainable supply chain,Vernica H.Villena and Dennis A.Gioia,March-April 2020,Harvard Business Review.35.CDP technical note:Relevance of

79、scope 3 categories by sector,April 11,2022,CDP.36.IFRS Foundation announces International Sustainability Standards Board,consolidation with CDSB and VRF,and publication of prototype disclosure requirements,November 3,2021,IFRS.37.Analysis shows that investors strongly support the SECs proposed clima

80、te disclosure rule,Steven M.Rothstein,October 11,2022,Ceres.ESG RADAR 2023|33 External Document 2022 Infosys LimitedAuthorsJeff Mosier|Infosys Knowledge Institute,DallasJeff Kavanaugh|Infosys Knowledge Institute,Dallas Analysis and ProductionIsaac LaBauve|Infosys Knowledge Institute,DallasDylan Cosp

81、er|Infosys Knowledge Institute,Dallas 34|ESG RADAR 2023External Document 2022 Infosys LimitedAbout Infosys Knowledge InstituteThe Infosys Knowledge Institute helps industry leaders develop a deeper understanding of business and technology trends through compelling thought leadership.Our researchers

82、and subject matter experts provide a fact base that aids decision making on critical business and technology issues.To view our research,visit Infosys Knowledge Institute at or email us at .2022 Infosys Limited,Bengaluru,India.All Rights Reserved.Infosys believes the information in this document is

83、accurate as of its publication date;such information is subject to change without notice.Infosys acknowledges the proprietary rights of other companies to the trademarks,product names and such other intellectual property rights mentioned in this document.Except as expressly permitted,neither this do

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