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Organizations increase sustainability investments amid global uncertainty

Almost all chief executives of large companies around the world expect climate change to affect their organizations’ strategy and operations over the next three years, according to a new study released today by global professional services firm Deloitte. 

Major problems are already affecting their business. including resource scarcity, changing consumption patterns, and carbon taxes.

For the 2023 CxO Sustainability Report: Accelerating the Green Transition, Deloitte and market research firm KS&R interviewed over 2,000 C-level executives in 24 countries across industries and companies with revenues of $500 million or more. to more than 10 billion dollars.

The study found that climate change has become a top priority for senior management, even as their companies face major geopolitical and economic disruptions. Climate change was ranked second among the top three priorities for the coming year in the survey (42%), behind the economic outlook (44%) and other high-profile issues such as supply chain (33%), competition (33%), and talent (33%).%). 

Deloitte Global CEO Joe Ucuzoglu said:

“If there was any doubt that climate change is a permanent part of business, the increased focus on sustainability by executives over the past year should put it to rest.” In a year of continued uncertainty, disruption, and competing business challenges, executives saw climate change as a top concern.

Almost all executives who responded to the survey stated that climate issues had affected their company in the past year. Of these, 
46% cited resource scarcity or resource costs,45% reported changes in customer consumption patterns or preferences, and 43% cited emissions regulations such as carbon taxes or emission limits.

As climate change rises to the top of corporate priorities, the allocation of resources to address these issues has increased, with three-quarters of executives reporting that their organizations have increased sustainability investments in the past year, including 19 percent who report a 20 percent increase or more.

The main activities focused on sustainability are the use of more sustainable materials, such as recycled materials or products that generate fewer emissions, as well as improving energy use (59%) or developing new ones, as mentioned by 59%. climate-friendly products and services
49%.

Employee engagement has also become an important initiative, of which 50% inform employees about climate change activities and impacts.
Despite these initiatives, Deloitte found that many companies still do not implement some key activities—only 44% of organizations require suppliers and business partners to meet sustainability criteria, and only a third link executive compensation to levels of environmental sustainability.

The survey found that managers are under pressure to address climate change from multiple stakeholders, with more than two-thirds reporting pressure from board members and management (68%) and regulators and governments (68%) and consumers (68%), and many also reporting pressure from investors (66%) and employees (65%).

According to Deloitte, employees have become increasingly influential, and more than half of executives surveyed report that employee engagement has led to increased sustainability efforts in their organizations over the past year.

The study also looked at the most significant obstacles organizations face in their ability to lead sustainability efforts. Difficulty measuring environmental impact was reported by 24%, followed by “too expensive” at 19% and demands from investors to focus on short-term business issues. with 18 percent. However, these barriers appear to have been decreasing over the past year, with more respondents to last year’s survey reporting that each of these issues is a barrier, with 30% reporting difficulty measuring impact, 27% reporting cost, and 25% reporting focus on the near term. pressures and obstacles in the 2022 survey.

Jennifer Steinmann, global head of Deloitte’s sustainability and climate practice, said:

“Our research shows that CxOs believe that both their organizations and the global economy can continue to grow as they meet their climate goals and reduce emissions of greenhouse gases.” 

Leaders must also harness their optimism to achieve sustainable and measurable impact, which will require scale-up and innovation in climate adaptation to ensure a just transition for all stakeholders.

 

just transition

Climate action continues, but challenges remain.

 

Organizations are taking action: 59% use more sustainable materials, 59% increase energy use, 50% train employees on climate change, and
9% of companies develop new climate-friendly products or services. They are also increasing efforts to adapt to climate change4 3 percent are renovating or relocating their sites to make them more resilient to climate change:

40% of Americans buy insurance against extreme weather risks, and 36% provide financial assistance to workers affected by extreme weather conditions.

However, as seen last year, companies are less likely to act to demonstrate that they have integrated climate considerations into their cultures and that they have the buy-in and influence of senior executives to achieve meaningful change. For example, 21% of CxOs said their organizations do not plan to link executive compensation to environmental sustainability, and 30% said they do not plan to lobby the government on climate initiatives.

Additionally, when asked how serious certain groups are about climate change, only 29% of CxOs said they believe the private sector is “very” serious. Nearly a quarter of CxOs said the difficulty of measuring their organizations’ environmental impact was the biggest barrier to scaling up, and nearly a fifth cited cost and a focus on near-term issues as obstacles.

And while many organizations are concerned with the so-called “just transition,”  which aims to ensure that the significant benefits of the transition to a low-carbon economy are widely shared and support those who are economically disadvantaged, the priority of this issue varies considerably. region and country. The Asia-Pacific region is particularly focused on a just transition, while some European countries and the United States do not consider the issue a priority. 

 

Recommendations to Accelerate the Green Transition

Deloitte’s 2023 survey shows that CxOs believe both their organizations and the global economy can continue to grow while meeting climate goals and reducing greenhouse gas emissions. So how can they help bridge the gap between ambition and impact, remove barriers to greater action, and begin to balance the short-term costs of climate initiatives?

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