- New survey shows nearly 70% of more than 500 global companies report higher than expected financial returns on climate initiatives benefiting the planet.
- This counters concerns that climate action may harm financial performance, as the survey shows this is stopping a third of businesses from doing more.
- Majority of existing climate commitments are not going far or fast enough to align with Paris Agreement targets, with less than half of companies planning to reduce emissions by 45% plus or setting targets to meet by 2030.
The EY organization today announces the release of the 2022 Sustainable Value Study, a survey of over 500 chief sustainability officers and equivalents representing companies worth more than US$1b around the world.
The survey finds companies taking decisive action to combat climate concerns are benefiting from unexpected financial value in areas like revenue growth and earnings, with 7 in 10 seeing financial benefits that exceed their expectations. Indeed, the results show that those companies taking the most ambitious climate action are also seeing the greatest financial benefits, being 2.4 times more likely to see a significantly higher financial return than they expected.
Those companies taking the boldest steps are also seeing unexpectedly positive benefits in areas like staff retention, recruitment, brand perception and customer purchasing behaviour.
This evidence counters concerns that climate action may harm financial performance. The research shows that these concerns are among the greatest barriers to companies taking further climate action, with 36% concerned it will both negatively impact financial performance and reduce their ability to compete in the market in the short term.
These results should give more confidence to companies who have not yet announced ambitious climate plans that there are financial upsides in doing so. This presents a win-win for business and global sustainability, which is increasingly vital as the action companies are currently taking will not go far or fast enough to meet the planet’s needs when compared to the Paris Agreement targets.
The vast majority (93%) of companies surveyed have made a public commitment on climate change, but just over a third (35%) have a commitment for 2030 and less than half (42%) plan to reduce emissions by 45% or more – with a 45% reduction by 2030 the global target set by the Paris Agreement to keep global temperature increases within 1.5°C and 2°C. Only 11% of responding companies have made a commitment to net zero.
Steve Varley, EY Global Vice Chair Sustainability, says:
“While the Paris Agreement is a target for governments, it also sets a standard for the business community to meet. Unfortunately, too little action is taking place too slowly to meet that standard.
“However, those companies acting now have lessons to teach the businesses dragging their heels, who may swiftly realize they are missing out on new business opportunities and genuine financial returns. Those taking decisive action are setting out an increasingly obvious ‘roadmap’ which can guide all businesses on how to become more sustainable, deliver on the priorities of their stakeholders and create financial value for their shareholders.
“Sustainability should be framed as a business imperative, creating competitive advantage and value that unleashes the positives of capitalism to support the wholescale decarbonization of business that we need – it is not too late, yet.”
Companies identified multiple barriers preventing them from taking further climate action, in addition to concerns about the impact on financial performance. Many of these may risk creating a culture of ‘committing’ but not ‘acting’ in addressing climate change:
- A lack of climate change expertise from the board or management
- Difficulty retaining or upskilling relevant talent
- Lack of data and technology to reduce emissions.
- A difficulty securing financing for climate change initiatives.
In addition, a lack of collaboration within company leadership teams is impacting their ability to take effective action, with 62% of respondents saying board members and management disagree on which criteria are most important when evaluating initiatives and 61% agreeing that so many groups are involved it is difficult to make progress.
Among the top factors motivating companies to invest in climate change are supporting business resilience (59%), improving their ESG ratings (57%), , meeting demands from their key stakeholders (56%) and responding to the scientific need to act on climate change (53%)
Positively, a majority (61%) of responding companies plan to spend more next year to address climate change compared to this year, with a quarter planning to spend ‘significantly more’.
“While there are very real practical and cultural barriers to further climate action by businesses, our findings do show a genuine desire to overcome them. Momentum must now build behind a culture of turning commitments into action, and there are clear business imperatives – and returns – in doing so.”
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