Are economic headwinds really dampening corporate sustainability spending plans?

A new analysis from Capgemini has revealed that most executives now believe the benefits of sustainability schemes outweigh the upfront costs. But will businesses be able to make these crucial investments amid the current economic downturn?

Are economic headwinds really dampening corporate sustainability spending plans?

The Capgemini Research Institute’s second annual report assessing corporate sustainability trends is out this week, detailing the results of a survey of executives at 718 large organisations across North America, Europe and the Asia-Pacific region.

Promisingly, there are several findings suggesting that decision-makers are beginning to see environmental sustainability as an opportunity rather than a burden.

Two-thirds (63%) of those polled said the business case for action is clear, up from one-fifth (21%) of those polled in 2022. Only 24% of those polled said the cost of sustainability initiatives outweighs the benefits, down from 53% last year.

Three-quarters (74%) of respondents say they hope to see increased revenue resulting from heightened sustainability ambitions and actions going forward.

Capgemini attributes this partly to increasing physical climate risks in many regions including droughts, wildfires and flash flooding. Other contributing factors are the continued spike in fossil fuel prices and legislation and regulations on the horizon aimed at improving corporate sustainability efforts.

Despite an increased recognition of the business benefits of sustainability-related schemes, the study found that most firms are struggling to invest in them.

In 2023, the average company has increased its investment in environmental sustainability as a share of revenue by just 0.1% year-on-year.

Capgemini’s head of global sustainability services Cyril Garcia implored businesses to turn this trend around.

“What we really need to see in the months to come is companies investing in future-proof sustainability measures and pivoting their business models to build sustainable products and services,” said Garcia. “It’s now or never for organisations: only those who will have invested early enough and put sustainability at the center of their strategy will be able to truly realize the benefits.”

Delays and downsizing

A separate report from EY this week shows that, unfortunately, most chief sustainability officers (CSO) at large firms do not believe their organisations are preparing to increase green spending in the coming year.

Of the 500 CSOs polled by EY, only one-third (34%) said their employer is planning to spend more on climate in the coming year. This is down from 61% who were optimistic about a climate spending boost last year.

This decrease in spending seems to be having a knock-on effect on business’s ability to develop and implement impactful climate strategies.

The average CSO told EY that their business is completing just four of the 32 climate actions listed in the survey. This is down from 10 actions on average last year.

Moreover, the median year for achieving net-zero goals among this cohort of businesses shifted back from 2036 to 2025, as the year-on-year rate of emissions reductions slowed.

EY’s global vice chair of sustainability Amy Brachio said: “Amidst the backdrop of unprecedented geopolitical tensions, sustainability leaders are facing clear challenges with resource allocation, but we cannot afford collective efforts to slow when the stakes are so high.”

She referenced the UN’s recent emissions gap report which concluded that, if all national climate pledges are delivered, warming of at least 2.5C and as much as 2.9C on pre-industrial levels is likely by 2100. This is far beyond the target limits of the Paris Agreement, 2C and 1.5C.

Brachio added: “CSOs in all sectors need to be doubling down on driving long term investment and movement on their sustainability commitments and adopt the meticulous planning required to achieve our net-zero goals.

“To do this, CSOs need to articulate a clear vision and effectively showcase the competitive advantage and financial value that can be derived from delivering on an ambitious sustainability strategy.”

As was the case with the study from the Capgemini Research Institute, EY found that an increasing number of executives are finding it easier to build the business case for sustainability initiatives.

Half (52%) of those polled by EY experienced financial returns from sustainability action that exceeded their expectations.

Related news: Half of British businesses unable to afford carbon reduction initiatives

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