Business leaders in Scotland are voting with their feet and declining to work with clients because of their ESG credentials, but at a much lower level than across the rest of the UK.
That is according to new research from accountancy and business advisory firm BDO, which took in 500 medium-sized businesses - defined as having a revenue between £10m and £300m - 56 of which were in Scotland.
Its survey found that 18% of businesses in Scotland are declining or discontinuing to work with clients or customers as a direct result of their environmental, social and governance (ESG) performance.
When asked which factors business leaders considered most important when selecting or renewing contracts with customers or suppliers, 55% selected equality, diversity and inclusion performance.
The second most important consideration from 21% of businesses is the reputation of potential customers or suppliers with external stakeholders including the media. Personal relationships was also cited by one in 10 companies.
In regard to diversity and inclusion, improving social mobility and socio-economic diversity is a key priority for a 38% of businesses. This compares to 23% of businesses that are prioritising environmental commitments as part of their ESG agenda.
Chris Meyrick, partner at BDO in Scotland, commented: “It is a difficult time to be doing business, as we continue to battle with the after-effects of the pandemic, geopolitical uncertainty and overbearing the cost-of-living crisis, but some business leaders are still focused on ensuring they are doing the right thing when it comes to ESG and are prepared to walk away from business, as a result.
“However, Scotland lags the national average, with only 18% of businesses revealing that they are already declining to work with clients due to poor ESG performance, compared to 43% nationally and reaching levels over 50% in areas such as the Thames Valley or Yorkshire.
“While all businesses will need to be prioritising ESG no matter what their size or sector in years to come, these results may be indicative of Scottish businesses facing disproportionate challenges to those elsewhere and the fact they simply can’t walk away from this revenue or their procurement process doesn’t yet factor this in.”
Don't miss the latest headlines with our twice-daily newsletter - sign up here for free.
