Climate crisis forcing quicker business reinvention, thousands of CEOs say

This is one of the headline findings of PwC’s new annual global survey of chief executives. Results from the poll of 4,702 business decision-makers were published on Monday (15 January) to coincide with the start of the World Economic Forum’s annual summit in Davos, Switzerland.

Climate was identified as a core driver of the need for business reinvention along with macroeconomic volatility and technological disruption.

Around one-third of those surveyed expect climate change to necessitate shifts in the ways in which they generate value in the next three years. Many are foreseeing changes to their supply chains and preparing to offer different products and/or services.

This evidences a perceived acceleration of the impact which the climate crisis has on businesses. Less than one-quarter of the chief executives said that climate-related issues have already led to changes in business models over the past five years.

Six in ten of the chief executives said their business has already launched one or more new products, services or technologies with either a lower emissions footprint or another climate-related benefit.

PwC’s report details how these changes are being made as a result of different kinds of risks.

It covers physical risks (for example damage to assets from extreme weather patterns and events); transition-related risks (such as the knock-on impacts of bringing high-carbon projects offline ahead of time) and reputational risks.

There are also enhanced legal risks associated with non-compliance with legally binding national emissions targets or more specific environmental disclosure requirements.

Is the private sector prepared?

The survey’s findings suggest that many businesses do not yet properly understand climate-related risks nor embed them into core strategy planning.

Around half (47%) of the businesses polled have begun enacting initiatives to improve adaptation to physical climate risks. But most of the remaining firms, 29% of the total, have no plans to act in response to these issues. Some of these firms, PwC noted, may be leaving this responsibility in the hands of their insurers.

The survey also found that changes in customer preferences, alterations to regulation and moves from competitors are seen by most chief executives as presenting nearer-term and more severe risk to viability than the climate crisis.

This is a concern given that physical climate risks are beginning to crystallise at a faster pace than previously predicted.

Last year was the hottest on record globally. 2023’s extreme weather events included ‘monster’ flooding Thesally, Greece, often described as the nation’s breadbasket; July heatwaves across North America, Europe and China; and April-May heatwaves across Asia that hit rice production significantly.

Without a complete picture of risks across the value chain and in the absence of top-level strategizing, businesses risk making changes in siloes and potentially overlooking the most impactful actions they can take.

The survey found that most businesses (76%) have energy efficiency initiatives, for example. But less than half (44%) have either started or completed work to upskill or reskill their workforce in preparation for the greening of their company and/or sector.

PwC’s global chair Bob Moritz said 2024 needs to be “a year of transformation” if businesses are to meaningfully “address the challenges and opportunities of the climate transition”.

“If businesses are to thrive over the short and long-term, build trust, and deliver sustained and

long-term value, they must accelerate the pace of reinvention,” he said.

Spotlight on Davos

Hundreds of decision-makers including policymakers, business leaders and philanthropists are descending on Davos this week for the World Economic Forum’s annual summit. This began on Monday and will conclude on Friday (19 January)

The event tends to set the tone for the year ahead in terms of top-line thinking regarding business strategy.

Ahead of the event, the Forum released its latest annual risk barometer. This is based on 1,400+ experts’ views on the biggest issues facing the world at present and those on the horizon.

The biggest perceived near-term risk across all kinds of experts is misinformation and disinformation. This is linked to the third-biggest perceived risk across this timeframe – social polarisation.

As was the case last year, increasingly frequent and severe extreme weather events are ranked as the second-biggest perceived risk for the world in the near future. Looking out to a ten-year period, experts see five of the top ten risks as environmental, with extreme weather in first place.

You can read edie’s full news article on the 2024 barometer here.

Related news: UN foresees significant climate risks to food systems, tourism, in 2024

Related analysis: Short-termism and finance biggest barriers to corporate climate action