Environmental, social and governance issues in the middle market
How middle market businesses are addressing ESG in their organizations
SPECIAL REPORT |
The past year marked a dramatic shift in the way the business community views its role in broader society as the Business Roundtable, representing the nation’s largest companies, redefined the purpose of a corporation from simply making profits for shareholders to benefiting multiple stakeholders—customers, employees, suppliers, communities and shareholders. The statement was an acknowledgement of what has been a groundswell of pressure on businesses to pay more attention to the way they operate, especially when it comes to their practices regarding environmental, social and governance issues, or ESG.
How much of this multiple stakeholder message is reaching companies in the middle market? And how can those companies that act on that message set themselves apart from the competition?
RSM asked middle market executives for their views on these questions and others as part of the Q4 2019 RSM US Middle Market Business Index survey. What emerged was a picture of a middle market economy that recognizes its broader responsibilities, but is still grappling with how to put those ideas into practice.
Even though the survey was taken before the onset of the coronavirus crisis, the issues will still be around after the public health emergency passes. The long-term view will likely resonate even if businesses in the short-term must focus on weathering the virus fallout and economic downturn.
Some of the survey findings include:
- Executives of middle market companies reported that they now have written objectives and performance metrics for stakeholders, including customers (70%), employees (74%), suppliers (56%) and communities (55%). While delivering results to investors remains among the top categories at 68%, it is not the highest.
- Larger middle market companies ($50 million to $1 billion in annual revenue) were more likely to have written objectives and performance metrics than smaller middle market companies ($10 million to $50 million in annual revenue).
- Just 39% of executives are familiar with ESG criteria to evaluate the performance of organizations, the same number as our 2018 survey. There was a divide between bigger and smaller companies’ familiarity with the use of ESG criteria, by 55% to 27%.