Pleo: What Are The Financial Challenges Behind ESG?

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What happens to ESG investment when money is tight? Pleo's new report reveals all...
Danish fintech company Pleo has released a report looking into UK businesses' relationship with ESG, analysing why sustainability often gets deprioritised

Pleo, Europe's leading expense management platform, has published an eye-opening report into the financial challenges UK businesses face today when trying to implement their ESG initiatives.

The study, entitled the Finance and Businesses Synergy Report, finds that whilst the majority of companies understand the importance and value of ESG, more than half of them are struggling to find funding to make a real impact.

Pleo's research digs into the tension between sustainability and finance in companies, especially when it comes to different teams interacting with one another | Credit: Pleo

The cost of ethical spending

In essence, Pleo's report sketches out a growing schism between sustainability aspirations and financial realities.

According to the Danish fintech company, 62% of UK businesses acknowledge ESG reporting as critical to improving their ethical and environmental impact.

However, 57% of them admit that the cost of ethical spending renders these initiatives unfeasible under current economic conditions.

These findings are concurrent with research completed elsewhere in the corporate sphere. In EY's Future Consumer Index, for example, it is revealed that sustainability is deprioritised during moments of financial duress. 

It seems quite clear that ESG is the first thing on the chopping block when times are tough, but the startling reality for struggling companies is that ESG regulations are expanding all the time.

In many countries around the world, ESG reporting is mandated for companies of a certain size, and reporting costs more than you might expect.

But, of course, reporting is not the only part of ESG.

“The brutal truth is that, to some, sustainability and social impact can feel distracting,” says Søren Westh Lonning, CFO of Pleo. 

“For ESG to move up the business agenda, a shift in mindset is essential. Leadership teams need to integrate ethics into core business opportunities.”

Søren Westh-Lonning, CFO of Pleo | Credit: Pleo

The economic pressures stalling progress

The challenging economic environment has forced many businesses to tighten their budgets. According to Pleo's report, 87% of UK companies have reduced spending over the past 18 months - a statistic which speaks for itself.

This financial retrenchment is accompanied by a fear of losing momentum; 69% of respondents believe that slowing or pausing spending could harm future growth opportunities.

This concern makes it even harder for businesses to allocate resources toward ESG initiatives, as they are preoccupied with investing in areas where ROI appears far more attainable.

Such pressures risk creating a vicious circle, where short-term financial concerns overshadow long-term sustainability goals.

According to the UN short-termism is the enemy of corporate sustainability, so, for the good of the planet, this pattern is to be avoided wherever possible.

Pleo's report highlights the desperate need for innovative strategies that can enable businesses to balance these competing priorities without compromising their financial stability.

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Collaboration as a path forward

One potential solution lies in fostering greater collaboration between finance teams and other departments.

Pleo's report reveals that 66% of respondents believe cross-departmental insights could lead to better spending decisions, while 72% agree that collaboration improves financial resilience and success.

By working better together, teams may be able to identify inefficiencies and reallocate resources toward ethical investments.

However, achieving this level of synergy isn't easy. Nearly 59% of survey participants view finance teams as difficult to work with, often due to general anxiety around financial discussions.

To overcome this barrier, CFOs and finance leaders must take on a big responsibility in building trust and improving communication across departments.

“CFOs have a significant role to play by aligning ESG reporting with business models and value creation,” explains Søren.

By embedding sustainability into core strategies, finance leaders can ensure that ethical considerations remain a priority even during times of economic uncertainty.

Rethinking leadership roles in ESG

For Pleo, the Chief Financial Officer is a business' most pivotal figure when it comes to making ESG happen.

As businesses increasingly tie sustainability efforts to financial strategy, CFOs are tasked with championing these initiatives while fostering accountability across their organisations.

This requires not only technical expertise but also strong leadership skills to navigate the complexities of integrating ESG into broader business objectives.

Still, the path ahead is fraught with obstacles. The perception of finance teams as gatekeepers rather than enablers often hinders progress.

To combat this, Pleo's report suggests that finance leaders focus on developing soft skills to facilitate smoother interactions with other departments.

Pleo's report suggests that improved communication between teams can iron out inefficiencies in spending and leave more room for ESG | Credit: Pleo

Balancing growth with sustainability

As UK businesses navigate an uncertain economic landscape, the tension between growth ambitions and sustainability goals remains palpable.

The findings from Pleo's report underscore the need for innovative solutions that make ESG initiatives both accessible and financially viable. Leadership will play a crucial role in bridging this gap.

By fostering collaboration and embedding ethics into core strategies, businesses can position themselves for long-term success while contributing positively to society and the environment.

The stakes are high—failure to act risks not only regulatory penalties but also reputational damage in an increasingly sustainable-conscious marketplace.

Pleo's research serves as a wake-up call for UK businesses: achieving meaningful progress on ESG requires more than just awareness—it demands action and, as Søren says, a "shift in mindset".


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