ESG Empowered Value Chains 2025

PwC Study: Bold plans, but ESG implementation is slow

Your expert for questions

Stefan Schrauf - PwC

Stefan Schrauf
EMEA Operations Lead at PwC Germany

ESG Champions embrace operational transformation

ESG is no longer a nicety; it’s a necessity. Customers demand it; investors require it; regulators are making it law. Still, most companies, while stating ambitious goals, have been slow to act. Transformation is costly and burdensome, and economic stresses are slowing efforts. But where many companies see challenges, some see opportunities.

“Like with digitization – a period of massive transformation characterized by high costs and uncertainty – there are big benefits to transforming without delay. Companies that digitized early, learned from mistakes and moved forward. Those that waited, are now investing heavily to catch up. We think it’s better to be an ESG Champion than a follower.”

Stefan Schrauf, EMEA Operations Lead at PwC Germany

The PwC Global ESG in Operations Survey of mostly large corporations shows many leaders think the same. Appearing to be green isn’t enough. To be competitive, operations must be reengineered to meet wide-ranging ESG standards. There is a subset of ESG champions emerging that enjoys top management support, has a clear strategy and vision and balanced focus on all ESG aspects. They rethink the end to end value chain and with that made their business more resilient for the future challenges. Those who lag behind need to speed up their ESG transformation to not lose ground. 

The study at a glance

Key findings

ESG in operations is a competitive imperative for companies – the majority of companies have set clear targets along all aspects and almost all companies (99%) consider ESG criteria in future investments.

The environmental aspect is currently in focus – 80% of companies have clearly defined long-term targets for emissions, while only 60% have social and governance targets in place.

Big intentions and little realisation – only one third of companies have implemented measures for emission reduction with main focus on Scope 1 and 2, however only 21% have Scope 3 measures in place.

ESG Champions enjoy top management support, integration of ESG into their operational strategy and vision, short- and long-term targets by function, and balanced focus on all ESG aspects.

ESG Champions rethinking the end-to-end value chain – incl. reengineering of supplier network, own footprint, product design, and adjusting their own business models towards circularity – have already twice as many measures implemented.

As we see 26% more champions with companies’ revenue greater than €3 billion, smaller companies have to catch up to not lose competitive grounds and increase resilience for future challenges.

ESG maturity varies by region and industry. Comparing the relative share of ESG Champions, North America and Asia are ahead of Europe and the industrial manufacturing and retail / consumer goods industry is leading, whereas the process and service industry are lagging behind.

How to be an ESG Champion

The study identified a subset of super achievers, i.e., ESG Champions. While most companies are focused on low-hanging fruits, like reducing emissions through carbon credits, Champions are in more advanced stages of ESG transformation.

PwC study 2023: “ESG Empowered Value Chains 2025”

As with almost all leaders surveyed, these Champions stated ambitious plans. What sets them apart is they are far more likely to be supporting targets with actions. Champions are implementing measures at twice the rate of non-champions and have moved beyond internal operations to introduce and monitor ESG standards across wider value chains.

Companies can learn from Champions, using what they do as a blueprint to accelerate their own ESG transformations. Here’s how companies surveyed measure up:

  • Beginners – 7%
    In the early stages of transformation, they have taken only one or two actions in their supply chain or procurement areas, and ESG targets and objectives aren’t defined. 
  • Followers – 46%
    It’s still early days, but they usually have a detailed roadmap for a few areas of the value chain, have done due diligence on new and existing suppliers based on risks, including those related to human rights. They have corporate ESG targets broken down into some operational functions, but less than 30% of products and services are in line with ESG objectives. 
  • Contenders – 41%
    These runners-up to Champions have detailed roadmaps in more than a few areas of the value chain but not as many as Champions. They assess risk beyond their Tier 1 suppliers, articulate standards and monitor adherence. Corporate ESG targets and KPIs are at a fairly advanced stage, and up to 70% of products and/or services are in line with ESG objectives. 
  • Champions – 6%
    The most ESG mature, they are in advanced stages of ESG transformation with robust oversight on human rights risks throughout their value chains, most products and/or services in line with ESG objectives, and ESG targets and KPIs tied to corporate targets, and broken down into operational functions, and subject to regular monitoring, among other things.
PwC study 2023: “ESG Empowered Value Chains 2025”

What holds companies back

Company leaders feel pressure to act on ESG, but corporate, strategic, technological, and operational challenges are holding them back. The biggest challenges in implementing ESG strategies are high costs and insufficient budgets: 42% of all companies listed these as significant challenges. Budgetary constraints present an even greater problem for smaller companies (revenue of less than €5 billion), with 18% more of them noting this challenge than larger companies.

Meanwhile, ESG Champions interestingly didn’t mention costs as a main challenge. Instead, inadequate access to data was at the top of the list for 32% of them. In fact, most companies mentioned struggling with inadequate IT, digital solutions, or data access as key ESG challenges. We find this predictable, as digital capabilities are still evolving for many enterprises.

For all companies, including Champions, unclear business impact was the second-most stated challenge. Convincing leaders, stakeholders, and shareholders that an ESG strategy is economically worthwhile – and indeed indispensable – is a challenge. What’s more, the opportunity costs of not making ESG changes are hard to quantify, but certainly significant for most companies.

Finally, many companies state they have yet to embrace ESG and its opportunities because they are too busy trying to stay afloat in the wake of the COVID-19 pandemic, rising supply chain costs and cost pressures from customers. Others are held back by a lack of knowledge, and some simply do not know where to begin.

Five Focus Areas: Main Challenges

High Costs/Insufficient Budgets

42% of all companies mentioned this as a top challenge, and relatively smaller companies (those under €5 billion in revenue) were more likely to cite it. Amid inflation with energy and material costs continuing to rise, this challenge will remain.

Unclear Business Impact

Executives are finding it hard to convince other company leaders as well as stakeholders and shareholders that an ESG strategy is economically worthwhile. As Champion companies become more competitive, this may be an easier case to make.

Material Shortages

A third of companies blame a lack of ESG compliant goods and supplies. We remain in a time of severe crisis with shortages of key materials like microchips and steel – never mind more sustainable varieties. 

Insufficient IT / Digital Solutions

Struggling with insufficient IT, digital solutions and data access plagues all companies. Digitization is what helps Champions succeed. They confirmed high levels of digitization and data transparency, and said having quality, reliable, easy to access data is fundamental to monitoring and steering impact and activities, cooperating with suppliers and customers, and meeting increasing reporting requirements, among other things.

Lack of Leadership

Nearly a quarter of companies cite insufficient top leadership support as a main challenge for implementing ESG strategy, compared to 13% of Champions who say the same. Significant and effective operational transformations rarely happen without support from key leaders and employee buy-in. 

“ESG is no longer a nicety; it’s a necessity. Consumers expect it; investors increasingly require it; regulators are writing it into law. Companies that delay may find the cost to compete is too great. The time to act is now.”

Hans-Joerg KutscheraESG Operations Lead at Strategy&

About the survey

We ran in-depth interviews between August 2 and September 13, 2022, with 900 senior executives at mostly large companies. 89% reported revenues over €1 billion. Industries included automotive, electronics, industrial manufacturing, process industries, retail and consumer goods, MedTech and pharma, the financial sector and service industries. Half of the companies are based in Europe but included were companies on every continent. Potential participants who said they had no knowledge of their company’s ESG strategy were excluded from the survey.

Follow us

Contact us

Stefan Schrauf

Stefan Schrauf

Partner, PwC Germany

Alistair Kett

Alistair Kett

Lead Partner, Supply Chain and Operations, PwC United Kingdom

Tel: +44 7730 146256

Marc Waco

Marc Waco

Operations Innovation Leader, PwC United States

Tel: +1 214-557-0220

Shaun Ryan

Shaun Ryan

Partner, Connected Digital Enterprise Leader, PwC Australia

Tel: +61 481 977 707