What sport can learn from ESG

What sport can learn from ESG

As ‘Environment’, ‘Social’ and ‘Governance’ (ESG) becomes an increasingly adopted framework for structuring organisations’ approaches to sustainability, how can the sports industry utilise the framework for unified, compelling impact?

The principles of ESG (environmental, social, governance), a framework to consider an organisation’s impact on economies and communities are not unfamiliar to sport. The International Olympic Committee, for example, published its first sustainability report in October 2018 with the Global Report Initiative, and, thereby, ESG as a guide.

As has been well established in sport, sustainability standards vary dramatically across the industry. Looking beyond which organisations use ESG and which don’t, the framework can highlight these discrepancies while aligning the industry towards more powerful sustainability impact.

A key part of ESG’s value lies in highlighting sustainability as an integral business concern, not an add-on. There are three key driving factors behind ESG strategies that sports organisations can focus on to adopt this mindset:

  1. Highlighting attractiveness – “We can clearly see a one-to-one correlation between ESG focus and financial success across our portfolio of companies, and a key reason for this is [the best] talent requiring a sense of meaning in their work,” explains Sara Rywe, partner at byFounders. Sports fans who are passionate about environmental preservation, for example, are drawn to the sports sustainability sector because of its purpose-led focus, so showing this through the lens of ESG is crucial for the industry to continue attracting talent.
  2. Outperforming competition – All sports organisations have a competitive drive, even though sustainability is commonly an area many organisations encourage collaboration. The risks organisations would need to manage in upcoming years by not prioritising ESG now will likely outweigh the risks associated with first mover disadvantage now.
  3. Showcasing compliancy – Only 19 of 109 sport managers – representing 48 countries and 30 sports with 43% female participants –  in the United Nations Environment Programme’s 2022 Sports for Nature survey were working towards compliancy certifications (e.g. LEED, ISO 20121 or equivalent) for their environmental efforts. This is bound to become more common as organisations target data collation around ESG. Sport participation can even be a method in itself for collecting data in the realm, as shown by The Ocean Race.

Of ESG’s three elements, environmental factors are widely acknowledged as the area requiring the most improvement in sport. Indeed, when 452 senior sports executives participating in the 7th edition of PwC’s annual Global Sports Survey were asked how advanced their organisation is in each area of ESG, 11.4% admitted they had not started environmental action, 32.9% were in ‘early stages’, and 7.5% didn’t know/abstained. Moreover, only 32 Sports for Nature survey participants said their organisations have formal environmental sustainability plans or strategies. ‘Net zero’ means little beyond a marketing term in this context.

Granted, tackling environmental initiatives in sport is often more complex than social and governance initiatives. Historically, areas like gender equality, local community empowerment, and, more recently, transparent governance and finances, have been tackled across the industry.

Environmental initiatives in sport tend to be short-term, leading to inconsistent progress. Nearly every participant in the Sports for Nature survey (89/109) said their organisation lacks resources to address environmental issues, with 71 pointing to lack of finances, and 55 highlighting knowledge gaps.

38.7% of 452 respondents in the Global Sports Survey said they would be prioritising all three elements of ESG in equal measure over the next 1-3 years, but, as PwC suggest, sports organisations face a “balancing act whilst managing limited resources and operational demands.”

Birmingham 2022 Commonwealth Games approach to sustainability is an example of this balance in action, and the Global Sports Survey suggests that the growing understanding of the interconnectedness and complexity of ESG will help organisations move beyond ad-hoc initiatives, but ESG only ranked 4th in what the survey’s participants perceive as key market forces, sitting behind changing fan preferences and behaviours, the growth of women’s sport, and the changing media landscape at the top of the list.

Perhaps participants underestimated its importance, however. Organisations, not only in sport, are under growing pressure to shift strategies from shareholder capitalism to stakeholder capitalism. Expectations of financial investors will, of course, always be front and centre, but expectations of what a sports club should be – whether that is a community-binding mechanism or climate change fighter – continue to grow amongst fans and other stakeholder groups.

Indeed, 2022 data from Dassault Systemes revealed that the biggest factor in motivating organisations to take environmental sustainability seriously is customer demands at 48%. Green image was next at 43%, motivating extreme cases like Vermont Green to incorporate sustainability as fundamental to the organisation. The internal goal of net zero was third at 40%, but goals generally aren’t enough to spark the required level of action when they aren’t adopted into policy.

As revealed by the Global Sports Survey, the biggest challenges for sports organisations to successfully implement a comprehensive ESG strategy – and pivot from goals to policy – is changing the organisational culture at 48.8%.

Speaking at SailGP’s Champions for Change event in July 2023, Dame Heather Rabbatts, who served as a Football Association director from 2011-2017 – the first ethnic minority person to do so – and the only woman on the organisation’s board, said she has found in conversations with various businesses that “they are quite intrigued by seeing women’s leadership in sport, because sport is such a relatable form of entertainment to all the people working in their businesses. I think it can be really engaging for senior leaders in businesses to hear from women about how they played together as a team, how they have leadership positions, and that helps to drive the internal cultural change in those businesses.”

Reflecting its silver medal ranking in the aforementioned Global Sports Survey question regarding key market forces, 75% of respondents expect women’s sports revenues to grow by more than 15% in the next 3-5 years. Institutional investors can be the catalyst for widespread cultural change across many sports organisations, but while new storytelling opportunities, athlete advocacy and purpose-led sponsorship are all high on the women’s sport agenda, PwC recognises that investment in women’s sport still needs to be aligned with ESG agendas.

Beyond organisational culture, the second and third biggest challenges for sports organisations to comprehensively implement ESG strategies are translating organisation wide ESG goals into day-to-day processes at 44.6%, and ensuring sufficient allocation of funding to support ESG transformation initiatives at 40.7% respectively. This is reflected by 74% of 442 survey respondents believing that institutional investors and sports organisations do not have aligned objectives. To prevent this, PwC urges sports organisations to consider the emerging leadership role of sustainability officers to ensure board-level representation and integration with corporate strategy.

In a survey conducted by Dassault Systemes in 2022, 15% of leaders said corporate responsibility was a factor that dictated corporate strategy and initiatives in 2020, growing to 39% in 2022. There are clearly signs of an upward trend, but external market threats have undoubtedly slowed the rate of increase. Global Sports Survey respondents identified increasing costs of living and potential economic slowdown as the two critical threats, while geopolitical instability and tightening regulatory frameworks followed in third and fourth respectively, with both looming further on the horizon than the former two.

To build preparedness and resilience against volatile externalities, Ivalua’s smart procurement expert, Alex Saric, believes a more “predictive, communicative, collaborative and transparent suite of tools” should be adopted across businesses’ supply chains. The GAMES project, for example, was founded in a major sports event context to collaborate with such goals in mind.

53.5% of 465 respondents in the Global Sports Survey believed the most impactful measure in making sporting events more sustainable would be reducing events’ environmental carbon footprint, followed by ensuring sustainable and long-term usage of sporting venues at 49.7%, and, crucially, including ESG criteria as a condition to host major sporting events at 48.8%, highlighting that sports actors are not oblivious to ESG’s value.

World Athletics embedded ESG criteria as an event hosting condition in its Athletics for a Better World Standard. Cities bidding to host World Athletics Series events, for which bids launched in the first half of 2023, will be required to commit to achieving gold level of the sustainability standard, making sustainability a core feature of all future World Athletics championships events.

The Global Sports Survey recognises that the legacy focus for major sporting events often falls on infrastructure, which PwC class as ‘hard legacy’. ESG, however, can help recognise the importance of ‘soft legacy’ and continuing social initiatives, for example, after an event’s conclusion. UEFA have embraced both hard and soft legacy, launching their Infrastructure Guidelines in November 2022, as well as an ESG strategy for EURO 2024.

Carbon Tracker’s ‘The Sky’s the Limit’ 2021 report concludedthat we’ve already reached the stage where “the technical and economic barriers have been crossed and the only impediment to change is political.” Anyone interested in climate change and sustainability can recognise this still rings true two years on, but the increased adoption of ESG in sport might soon transform the status quo via the EU’s introduction of the Corporate Sustainability Reporting Directive.

Beginning in 2024, almost 50,000 companies – including some of the largest sports organisations – will be subject to mandatory sustainability reporting.With the first CSRD reports due in 2025, the largest sports organisations will have to prioritise ESG principles sooner rather than later, making the transition from lofty sustainability goals to tangible policy actions, and ultimately greater success, closer on the horizon than many of us might think.

Opt into our weekly newsletter for exclusive content focused on sustainability strategy, communication and leadership for sport’s ecosystem.

Leave a Comment

Your email address will not be published. Required fields are marked with *