A new global survey of senior corporate executives challenges the common perception that companies are overlooking climate change risks, a concern that is especially prevalent among millennial and Gen Z employees.
A recent Deloitte report shows that while business leaders are waking up to the impacts that climate change could have on their businesses and communities, there is a disconnect between ambition and action. The report, which surveyed more than 2,000 executives from 21 countries across North America, Europe, Africa, Asia and Oceania, in particular highlights the feedback of 19 percent of respondents. These executives, which Deloitte describes as “leaders,” have implemented “needle-moving” actions that can provide other companies with ideas on how to shift toward a low-carbon future.
Such actions include: the launch of climate-friendly products or services, mandating that suppliers and business partners meet sustainability criteria, updating or even relocating facilities to make them more climate resilient, considering climate policies when evaluating lobbying and political donations, and connecting executive compensation to a company’s sustainability performance.
According to Deloitte, climate “leaders'' took at least four out of the above five actions, and the report concludes they are "more likely than others to see the benefits of their efforts and less likely to see cost and short-term priorities as obstacles — perhaps an indication they grasp the price of climate inaction.”
According to the survey, 97 percent of companies reported they have already experienced the negative impacts of climate change. Further, 81 percent of executives say climate events like severe weather and rising sea levels have affected them personally over the past year.
While most industries have been affected by ongoing disruptions to their business models and supply chains worldwide, the changes are most felt across the consumer products, automotive, technology, transportation and hospitality sectors. Those changes include taking measures to reduce companies’ carbon footprint. For example, 55 percent of companies responded by reducing unnecessary air travel.
Despite the growing concern about the long-term impacts that climate change can have on companies, executives are now more optimistic (88 percent) that immediate action can limit climate-related risks than they were eight months ago (63 percent) when Deloitte released its previous survey on executives’ views toward climate change.
This optimism “is there by virtue of where they sit [...] as business leaders," Kathryn Alsegaf, Deloitte’s global internal sustainability leader, told TriplePundit in a recent interview. For the “leaders of the pack," this means “mak[ing] sure they have sustainability criteria baked in” to their supply chains, as well as securing the resilience of their facilities, changing their approaches toward lobbying, and rethinking how they structure executive compensation, she said.
"For most companies, having a sustainability plan is no longer a differentiator but an expectation from customers and employees," observed Sarah Chapman at Manulife, one of the survey’s respondents. "As a strong global franchise, we have an important role to play in the transition to a world where net-zero carbon emissions are a reality.”
Though business executives are clearly feeling the momentum and urgency that climate change concerns keep generating, many of them are unsure how to proceed in order to take on such challenges.
Though many companies realize the need to mitigate risk now for financial stability later, they struggle with the costs of that shift. The risks also vary by region: Executives in Europe, for example, are driven by regulatory changes, while those in Asia are driven more by operational issues. When asked about the benefits of climate action, business leaders overall were largely driven by brand recognition and reputation, customer satisfaction, and their employees’ morale and well-being.
To have long-term impact, it’s crucial for organizations to make their climate metrics as rigorous as other analytics, but a third of executives said challenges related to measuring their organizations’ environmental impact is a top barrier. Companies struggle to find the right framework that helps them coordinate goals and metrics with their suppliers.
As a result, they are relying on low-hanging fruit like using more sustainable materials and equipment and increasing energy efficiency. Such actions are not negligible, but they are smaller-scale and heavy on optics. This may be one of the reasons that only 43 percent of executives currently believe their sustainability efforts will meaningfully address climate change, according to the survey.
On the other hand, executives are feeling pressure from their stakeholders: most notably regulators and government (77 percent), board members and management (75 percent), and consumers and clients (75 percent). They are least concerned about banks and lenders (55 percent), but interestingly, second-least concerned about employees (65 percent), whose growing demand for accountability is detailed in a separate Deloitte report.
Still, it’s not an insignificant number, and Alsegaf concluded that companies will increasingly take notice. Employees will help push for that shift: “Vocal” Gen Z employees list climate change as their “number one issue since the pandemic.”
Alsegaf was also encouraged by the fact that companies see employee morale and well-being as a benefit of climate action. “Mental health is now higher on the agenda,” she said, sharing that whenever Deloitte hosts a “broad-reaching town hall, the environment always comes up.”
Though some organizations’ sustainability goals put a disproportionate emphasis on their image and brand reputation, the more successful companies see financial returns as mutually beneficial.
One survey respondent, Christine Dacre, the CFO of TransLink, told Deloitte’s researchers: “People will often talk about the cost of climate investments, but they don’t often realize the savings it will provide in the long term. For our climate investments, including our low-carbon fleet strategy, we look at the whole lifecycle, not just the upfront investment.”
Amid the manifold environmental, social and economic costs of climate change, there’s one key way to transform executives from being aware to taking action. In Alsegaf’s opinion, tying compensation to sustainability performance makes climate change a professional problem for executives. Senior leadership can get a start by establishing measurable goals, such as those based on science-based targets that limit warming to 1.5 degrees Celsius.
Ultimately, “it’s a flawed assumption that doing nothing or not taking action comes at no cost even to companies,” Alsegaf said. “Business can move the needle a certain amount. We also need civil society and government. Climate is a wicked problem and we need to work on [it] together.”
Image credit: Tobias Rademacher via Unsplash
Chloé is a content marketer and storyteller in the sustainability, SaaS, and education fields. From NYC and based in Odense, Denmark, she is a foodie and frequent traveler most likely to be found in a café. She writes about coffee, food waste, sustainability innovation, and environmental conservation.