Over 75% of business leaders increased their sustainability investments over the past year, confirming that climate change is a top priority for their organisations amid global uncertainty.
Deloitte’s 2023 CxO Sustainability Report: Accelerating the Green Transition found that global C-level business leaders (or CxOs) view climate change as a top priority for their organizations amid global uncertainty. When asked to rank the issues most pressing to their organisations, many CxOs rated climate change as a “top three issue,” ahead of seven others, including innovation, competition for talent, and supply chain challenges.
In fact, only economic outlook ranked slightly higher. Moreover, 75% of CxOs said their organisations have increased their sustainability investments over the past year; and nearly 20% of whom said they’ve increased investments “significantly.”
Deloitte built upon past research by surveying more than 2,000 CxOs across 24 countries to gauge concerns and actions from business leaders on climate change and sustainability. The report also identifies key recommendations for organisations to help close the gap between ambition and impact in order to accelerate progress to a low-carbon economy.
CLIMATE CHANGE FOCUS
“If there was any doubt that climate change is an enduring part of the business agenda, the increased focus on sustainability by leaders over the past year should put it to rest. In a year of continued uncertainty, disruption, and competing business challenges, leaders ranked climate change as a top issue,” said Deloitte Global CEO Joe Ucuzoglu. “The path to a more sustainable future will take time, it will require businesses investment, and it will be driven by new and innovative technologies, and creative approaches. It is promising to see that C-suite leaders are making sustainability a priority and increasing their investments to help lead the way.”
Almost every CxO surveyed said their organisation has felt the impacts of climate change over the past year. CxOs reported “resource scarcity/cost of resources” as the top issue already impacting their companies (46%), while 45% highlighted “changing consumption patterns or preferences related to climate change” and 43% reported “regulation of emissions” as other top issues impacting their companies. Additionally, around a third of executives said climate change is negatively affecting their employees’ physical (37%) and mental (32%) health.
TACKLING CLIMATE CHANGE
In addition to the impact on their businesses and stakeholders, 82% of executives said they have been personally impacted by climate events over the past year, with extreme heat the most frequently cited issue, and 62% said they feel concerned or worried about climate change all or most of the time.
Despite these concerns, 78% of leaders are “somewhat” or “extremely” optimistic the world will take sufficient steps to avoid the worst effects of climate change, and 84% agreed/strongly agreed that global economic growth can be achieved while also reaching climate change goals.
“Our survey tells us that CxOs believe that both their organisations and the global economy can continue to grow while reaching climate goals and reducing greenhouse gas emissions,” noted Jennifer Steinmann, Deloitte Global Sustainability & Climate Practice Leader. “Leaders should also harness their optimism to drive sustained, measurable impact, which will require ramping up climate adaptation efforts while also facilitating innovation that ensures a just transition for all stakeholders.”
MEETING STAKEHOLDER DEMANDS
The survey revealed that organisations are feeling broad pressure to act on climate change from across their stakeholder groups. Sixty-eight percent of CxOs said they feel a large-to-moderate degree of pressure from each of the following groups: board members and management, regulators and government, and consumers and clients. Organizations are also feeling pressure from their shareholders and investors (66%), employees (64%), and civil society (64%).
Employee activism is specifically driving increased action, with more than half of CxOs saying employee pressure on climate matters led their organisations to increase sustainability actions over the last year; 24% said employee activism led to a “significant” increase. Regulation is also influential: 65% of CxOs said the changing regulatory environment led their organisations to increase climate action over the last year.
In line with last year’s report, CxOs chose brand recognition and reputation, customer satisfaction, and employee morale and well-being as three of the four top benefits of their companies’ sustainability efforts, suggesting many CxOs see climate actions as a way to strengthen stakeholder relationships. The lowest-ranked benefits (all financial) suggest CxOs continue to struggle to define the longer-term financial opportunities that sustainability measures offer.
CLIMATE ACTION CHALLENGES
Although climate action continues, challenges remain highlighted the study.
Organisations are taking action. For example:
- 59% are using more sustainable materials.
- 59% are increasing the efficiency of energy use.
- 50% are training employees on climate change.
- 49% are developing new climate-friendly products or services.
Organisations are also ramping up climate adaptation efforts. For example, 43% are updating or relocating facilities to make them more climate change resistant; 40% are purchasing insurance coverage against extreme weather risks; and 36% are offering financial assistance to employees who have been impacted by extreme weather.
JUST GREEN TRANSITION
However, as seen last year, companies are less likely to implement actions that demonstrate they have embedded climate considerations into their cultures and have the senior leader buy-in and influence to effect meaningful transformation. For example, 21% of CxOs indicated their organisations have no plans to tie senior leader compensation to environmental sustainability performance, and 30% said they have no plans to lobby government for climate initiatives.
Additionally, when asked how serious certain groups are about addressing 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 organisations’ environmental impact was a top barrier to increased action, and nearly one-fifth cited cost and focus on near-term issues as barriers.
While many organisations are concerned about a “just transition”– which seeks to ensure the substantial benefits of transitioning to a low-carbon economy are shared widely and support those who stand to lose economically; prioritisation of this issue varies considerably by region and country. The Asia Pacific region is especially focused on a just transition, while some European countries and the US are less likely to see this issue as a priority.
RECOMMENDATIONS TO ACCELERATE GREEN TRANSITION
The 2023 Deloitte survey shows that CxOs do believe that both their organizations and the global economy can continue to grow while reaching climate goals and reducing greenhouse gas emissions. So, how can they help close the gap between ambition and impact, break through the barriers to greater action, and start to balance the near-term costs of climate initiatives with the long-term benefits?
The report offers several recommendations to help CxOs get started, including embedding climate goals into their business’s overall strategy and purpose, building trust by taking credible climate actions, empowering the board, encouraging stakeholder action, investing in today’s (and tomorrow’s) technologies, and collaborating to drive systems-level change. You can check out the recommendations and learn more about Deloitte’s 2023 CxO Sustainability Report, by clicking here.
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