ESG And Mergers Cut First In Tough Economic Climate

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ESG And Mergers Cut First In Tough Economic Climate

Not a day goes by when the words sustainability and Environmental, Social Governance issues are shown on social media, the television, mobile phones or the vast array of printed media. However, the results of a survey which was performed by Gartner has discovered somewhat surprisingly that the concept of sustainability and mergers and acquistions would be number one on the list if the present economic environment carries on unabated and there is no noticeable change in the situation.

So What Challenges Is Business Facing?

At the time of writing, businesses in any industry are facing pressures from:

  • supply chain limitations
  • escalating inflation
  • excessively high interest rates and
  • scarcity of workers.

The Report found that these three challenges are having a major impact on affected organisations.

Over The Cliff?

The Survey highlighted issues concerning the approaches many businesses have taken over the previous two-and-a-half years. Businesses appeared to have focussed on the two current hot topics of Environmental, Social and Governance and sustainability and they have allocated huge amounts of financial resources into these two areas. Due to the extensive amounts of resources which have been invested the survey revealed that the monies invested in them will be right at the top of the list when business organisations are in search of items to slash from the budget. Randeep Rathindran, the holder of the position of Vice President in the area of research at Garner made some comments that slashing the Merger and Acquisition budget is a decision which sticks out like a sore thumb after a peak in the amount of transactions in 2021. Excessively high interest rates are a major hurdle for business because they raise prices in terms of financing.

Real Priorties?

With all the talk in the media about sustainability and with some areas of law putting the concept front and centre. This is especially prevalent in the area of planning law, where the presumption in favour of sustainable development is rife. Many leading thinkers in the field have seemingly found it astonishing that they are considering making a cut in this area, never mind putting the budgetary item on top of their list. This is because the majority of business leaders in the position of CEO cited the most important target from a strategic perspective was Environmental, Social and Governance. However, in stark contrast to the list of supposed priority issues, for example:

  • just over forty percent of those who answered the survey would consider targeting Merger & Acquisition first in a round of budget reductions
  • a little under forty percent of businesses would slash environmental and sustainability spending and
  • approximately thirty percent of respondents to the survey cited the slashing of the workforce budget first

So What Are Businesses Putting First?

The survey appeared to shine a spotlight on the issues businesses seem to be prioritising in these difficult economic times and the balance they need to strike when they face the above challenges. Within the results respondents cited the following issues along with their statistics with:

  • around half of the workforce and
  • just over forty percent citing investments in digital would be bottom of the list
  • one percent citing technological investments and
  • being the target of budget restrictions.

Industrial Differences?

When comparing the service sector to the product industry, the highest probability of budget cuts to workforce spending appears to be most likely in the service sector and in stark contrast with the product sector where protecting investment in the workforce appears to be a top priority.

The Legists Content Team

ASSESSING FIRMS

#LeighDay #IrwinMitchell #PenningtonManchesCooper #SimpsonMillarLLP #SlaterandGordon #ThompsonsSolicitorsLLP #BindmansLLP #CurzonGreenSolicitors #didlw #HodgeJones&Allen #RahmanLoweSolicitors

THE ARTICLE WAS WRITTEN USING THE FOLLOWING SOURCES

[1] Sustainability on the chopping block as economic squeeze bites, survey finds - Corporate Secretary - 27 July 2022 - Sustainability on the chopping block as economic squeeze bites, survey finds | Corporate Secretary

[2] van der Meulen, Rob – Gartner CFO and CEO Survey Shows M & A and Sustainability Are First Areas to Face Cuts – Gartner – 25 July 2022 - Gartner CFO and CEO Survey Shows M&A and Sustainability Are First Areas to Face Cutsz

[3] Gartner Survey Reveals Significant Shifts in CEO Thinking on Sustainability, Workforce Issues and Inflation in 2022 – Gartner - 18 May 2022 - Gartner Survey Reveals Significant Shifts in CEO Thinking on Sustainability, Workforce Issues and Inflation in 2022

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