New Deloitte Research Highlights Increasing Business Concern About Climate Change; Reveals Disconnect Between Ambition and Impact

Key highlights:

– Ninety-seven percent of companies surveyed have already felt the effects of climate change–triggering a greater sense of urgency to act now

– However, some CxOs are struggling to take actions that balance short-term incremental steps with long-term measurable impact, nor do they seem to fully understand the benefits of embedding sustainability into business strategies and operations

– A series of actions emerge as a model for driving climate impact

Released today, Deloitte’s 2022 CxO Sustainability Report: The Disconnect Between Ambition and Impact, reveals that global C-level business leaders (or CxOs) are increasingly concerned about climate change and see the world at a tipping point to act. Eighty-nine percent of CxOs agree there’s a climate crisis and 63% say their organizations are very concerned. Yet, they are struggling to fully embed sustainability into their core business strategies, operations, and cultures.

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Understanding the rising importance of sustainability and the immense threat of climate change, Deloitte built upon past research by engaging more than 2,000 CxOs across 21 countries to examine business leaders’ and companies’ concerns and actions related to climate change and sustainability. The report also explores the disconnect between company ambition and impact, as well as steps CxOs can take to start to bridge the gap.

“The battle against climate change isn’t a choice, it’s billions of choices,” says Deloitte Global CEO Punit Renjen. “No action is insignificant, but certain activities and decisions ‘move the needle’ more than others, and those bolder actions from business leaders are needed now—while there’s still time to limit the damage. It’s time to prove we’re up to the challenge.”

Concern and optimism: Motivators for change

The impacts of climate change are weighing heavily on executives’ minds. The majority (79%) of CxOs believe the world is at a tipping point when it comes to responding to climate change. That’s up 20 percentage points from a Deloitte survey conducted eight months prior, underscoring the growing importance of acting swiftly. What’s more, 88% of CxOs are optimistic that with immediate action, the world can limit the worst impacts to the planet. That is similarly higher than 63% eight months prior. The surge in concern, but also optimism, demonstrates that leaders are increasingly cognizant of the need to act now.

The data shows CxOs are feeling tangible pressure on a number of levels:

• Almost all respondents (97%) indicated their companies have already been negatively impacted by climate change, and about half said their operations have been impacted (e.g., disruption to business models and supply networks worldwide).
• Eighty-one percent of CxOs have been personally impacted by a climate event (e.g., extreme heat, worsening storms, wildfires) over the last 12 months.
• Additionally, stakeholder groups—including regulators, shareholders, consumers, and employees—are all adding to the pressure to act.

“Climate change is no longer in the distant or even near future. It’s here now and the choices we make today will determine the quality of life for generations to come,” says Jennifer Steinmann, Deloitte Global Climate and Sustainability Marketplace Leader. “A better future depends on a profound and lasting change in attitude and behavior from governments, businesses, and individuals. The business community can help model new forms of cooperation that identify the best ideas, regardless of source—and create new and lasting solutions that will have the greatest impact for them, their stakeholders, and their communities.”

Disconnects exist between ambitions, actions, and impacts

Companies are acting: Two-thirds of CxOs said their organizations are using more sustainable materials and increasing the efficiency of energy use; more than half have adopted energy-efficient or climate-friendly machinery, technologies, and equipment; and a majority are intentionally reducing air travel and training employees on their climate actions and impact.

However, 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. While all sustainability actions are important, Deloitte’s analysis of the report has identified five “needle-moving” actions that, especially when taken together, demonstrate a deeper understanding of the business benefits of sustainability. They 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 and political donations; and
• Tying senior leader compensation to sustainability performance.

Compared to other climate actions, companies are much less likely to have already undertaken these five, and more than one-third of organizations haven’t implemented more than one of them. While concern for the environment and optimism for change both remain strong, organizations will increasingly need to consider taking more decisive action to limit the worst impacts of climate change.

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CxOs also 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 beneficial to their relationships with their stakeholders. The lowest-ranked benefits (revenue from both longstanding and new business, asset values, cost of investment, and operating margins) suggest CxOs continue to struggle with the short-term costs of transitioning to a low carbon future.

Lessons from sustainability leaders

Deloitte’s survey revealed a group of leaders—19% of the sample—whose organizations serve as a model for tackling sustainability with efficiency and effectiveness, while reaping the benefits in return. These leading organizations have implemented at least four of the five “needle-moving” sustainability actions. Compared to those organizations who haven’t implemented more than one—35% of the total (nearly double the leader group)—these leaders are:

• More concerned about climate change (74% versus 52%);
• Expecting climate change to have a high impact on their business strategies in the coming years (73% versus 50%);
• Planning to achieve net-zero emissions by 2030 (82% versus 50%);
• Less likely to see cost as an obstacle for sustainability efforts, indicating they may have a better understanding of the costs associated with inaction and have greater senior leader buy-in; and
• More likely to understand the business opportunity of sustainability to their bottom lines, stakeholder satisfaction, and general broader performance.

“Not all businesses are at the same stage in their climate journeys, but all companies will soon need to move from ‘why’ to ‘how’ with their own customized approach,” says Renjen. “However, these actions are important markers of leadership as they require having a mindset that sees both the risks of inaction and the opportunity of sustainability, a culture that embeds climate directly into business strategy, buy-in from senior leaders, and the ability to influence third parties, including business partners, government, and regulators.”

Methodology
The report is based on a survey of 2,083 C-level executives. The survey, conducted by KS&R Inc. and Deloitte, during September and October 2021, polled respondents from 21 countries: 44% from Europe/South Africa; 31% from the Americas; and 24% from Asia Pacific. All major industry sectors were represented in our sample. Additionally, KS&R and Deloitte conducted select, one on one interviews with global industry leaders.

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