Executives across the globe are increasingly concerned about climate change, according to Deloitte research, but they are making only halting progress towards taking action to make a difference at their companies.
More than three-fourths (79%) of C-suite leaders polled in September and October of last year said they believe the world is at a climate change tipping point. That's up from 59% just eight months earlier.
"There's an increased sense of urgency, and executives understand this is the right time to act," said Jennifer Steinmann, Deloitte's Global Climate & Sustainability Marketplace leader.
Many of the more than 2,000 respondents surveyed for the 2022 Deloitte CxO Sustainability Report said the effects of climate change are being felt in their organisations:
- Almost all (97%) said their companies have been negatively affected by climate change.
- About half (48%) said their operations have been affected by climate-related disasters, for example, in disruption of business models and supply networks.
- Almost two-thirds (62%) said they expect climate change to have a high or very high effect on their organisation's strategy and operations over the next three years.
Climate change has personally affected 81% of the respondents in some way.
"We all know that when there's a personal impact, whether it's extreme heat or wildfires or extreme storms, it starts to weigh on you," Steinmann said, "but then it affects how you interact on a day-to-day basis in your work as well."
In this environment, many companies are taking action:
- 67% are using more sustainable materials.
- 66% are increasing the efficiency of their energy use.
- 57% are using energy-efficient or climate-friendly machinery, technologies, and equipment.
- 57% are training employees on climate change actions and impacts.
- 55% plan to reduce their air travel even after the COVID-19 pandemic subsides.
But fewer organisations have moved to take what the survey calls "needle-moving actions" that have more substantial effects on climate change but are more difficult to implement. Just 19% of respondents said their companies have taken at least four out of five of these key actions, which are:
- Developing new climate-friendly products or services.
- Requiring suppliers and business partners to meet specific sustainability criteria.
- Updating or relocating facilities to make them more resistant to climate impacts.
- Incorporating climate considerations into lobbying or political donations.
- Tying senior leaders' compensation to environmental sustainability performance.
"Most of these actions are not short-term plays, and they require quite a bit of work to accomplish," Steinmann said.
"Each company, each industry, each region faces unique challenges when developing an action plan for environmental sustainability, and that makes it challenging for leaders to drive transformation."
She suggests that to turn their intentions on climate change into action, executives can:
- Follow recognised frameworks. These can assist in setting appropriate goals and assess progress on objectives ranging from calculating carbon footprints to implementing reporting processes. Popular frameworks addressing either climate change or sustanability have been created by the Climate Disclosure Standards Board, the Value Reporting Foundation, the Global Reporting Initiative, and the Task Force on Climate-Related Financial Disclosures. The existence of multiple frameworks should become less problematic as many of these will be incorporated into new standards developed by the recently formed International Sustainability Standards Board, which also will give leaders new insight.
- Create accountability. A concrete plan is needed to ensure that near-term accountability is set for progress towards long-term goals. Many top executives will exit long before their companies' net-zero dates, so tangible, incremental, and measurable goals are essential for making progress.
- Educate senior leaders and board members. These leaders can be told how their organisations are affected by climate change and can make a positive impact on the environment. "Approach climate metrics with the same rigour that the organisation uses to approach other operating metrics," Steinmann said. "Think about control, management oversight, and the risk processes applied to climate metrics to really parallel those used for other key performance indicators."
- Magnify the impact beyond their own operations. This includes working with suppliers, business partners, clients, peers, governments, regulators, and nongovernmental organisations, and sharing leading practices.
- Embed climate considerations into every part of the business. This may require a fundamental business model transformation with implications for procurement, talent, the supply chain, product development, and customer relationships.
"If we go back to those actions that are important and have impact … you'll see that a lot of those get to bottom-line results," Steinmann said.
— To comment on this article or to suggest an idea for another article, contact Ken Tysiac at Kenneth.Tysiac@aicpa-cima.com.