Corporate executives still don’t believe sustainable business is profitable, survey reveals

A majority of businesses anticipate that climate change will affect their business model by 2050.

Conducted by the Capgemini Research Institute, the survey was responded to by 2,004 senior decision-makers at 668 large businesses across 12 countries. All major industries were represented in this sample.

Almost two-thirds of the executives (64%) said sustainability is now on the C-suite’s agenda, reflecting the trend towards environmental and social issues moving out of silos and into core business strategies and discussions. Yet, the survey revealed, most executives are not building on top-level discussions with concrete actions to deliver – and may be reluctant to do so due to a lack of genuine belief that sustainable business is the best course of action.

Half (49%) of the respondents said that their organisation does not have a defined list of sustainability initiatives for the short-term, classed as the next three years. At the biggest companies covered by the survey – those with $20bn or more in annual revenues – investment into sustainability-related initiatives averaged less than 0.5% of the annual revenue equivalent.

The Capgemini Research Institute believes that a lack of understanding about how taking an ambitious approach to sustainability can save operating costs, improve resilience, open new innovation opportunities and post reputation – all things that can improve profitability – is underpinning these disappointing trends.

Only one-fifth of those surveyed said there is a clear business case for improving sustainability. 53% said that the cost of sustainability initiatives always outweigh the benefits. The same portion would agree that sustainability initiatives are “a financial burden” and that they approach them as a tick-box exercise, a way to maintain a social licence to operate.

Yet the Capgemini Research Institute has previously (looking at performance from 2020 to 2021) assessed the financials of companies it classes as sustainability ‘frontrunners’, revealing that, on average, they reap a net profit margin 9% higher than their peers. These companies also reported 83% higher revenue, on a per-employee basis, than the average.

“With increasing regulation and pressure from civil society, resulting in more scrutiny by consumers and investors, companies that are lagging in acting on their sustainability ambitions run a high risk of seeing their current business models become obsolete or inadequate in the coming years,” Capgemini Invent’s chief executive Cyril Garcia said. “Who would want to run an unsustainable company?”

The report concludes with a string of recommendations on sustainability leadership for chief financial officers, chief marketing officers, chief design and product officers, those heading up procurement and technology and chief operating officers. It also states that it is “critical” that HR departments properly recognise the need for well-staffed sustainability teams and for professionals with sustainability skills in all other departments.

Sustainable Value Study

Last week, EY published a study assessing the actions that more than 500 large businesses have taken to reduce emissions across their value chains. The study also included surveys with chief sustainability officers, primarily focused on how they are weighing profitability with environmental work.

Almost two-thirds (64%) of the CSOs said that it is sometimes challenging to balance the non-financial case for climate action with the financials of a project. However, EY’s research on the financial impact of the climate initiatives conducted by the companies found that 37% generate a notable positive financial impact, compared with 19% that will have a negative impact.

The study also found that companies regarded as leading on climate action were 2.4 times more likely to report significantly higher financial results than expected.

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