Growing profits and boosting reputation: Are boards finally starting to become sustainability champions?

This is welcome news given fears that corporate strategising around and investment in sustainability initiatives could be placed on the back-burner in this mega-election year, in which many nations including edie’s home, the UK, are in a recession.

IBM polled 5,000 C-suite executives across 22 countries and almost two dozen industries, finding that three-quarters now believe that an enhanced sustainability focus drives better business results.

The same proportion agrees with the statement that sustainability “is a revenue enabler rather than a cost centre”.

This understanding is vital due to a widespread unwillingness to invest in sustainability-related initiatives for non-financial benefits. Less than one in five of those polled say meeting targets is, in and of itself, enough to justify investments.

A similar survey from law firm Ashurst, which covered 2,000+ managers in charge of energy-related decision-making at businesses, found that three-quarters faced pressure from their boards to accelerate decarbonisation.

They described this pressure as either “significant” or “extreme”, with most respondents stating that their company’s executives were a greater driving force for sustainable energy and technology investments than customers, regulators and even NGOs.

Almost all (95%) of those polled by Ashurst said their business expects to increase energy transition investments “significantly” in the coming five years.

From siloed to embedded

IBM nonetheless found that most firms have not yet embedded sustainability into their day-to-day processes and their strategic plans for the upcoming business cycle. As such, they risk missing out on the full scope of potential benefits to their bottom line.

Seven in ten of the executives polled believe that sustainability can, and should, be a higher priority within their organisations.

Fewer than two in ten polled by IBM stated that their employer uses sustainability data to inform their innovation strategies and initiatives, increasing slightly to three in ten for decision-making around operational improvements.

Similarly, Ashurst said there is still “enormous opportunity” for firms to outshine their peers by taking a more “bold and strategic approach”.

“Sustainability requires intentionality and a shared corporate vision… [it] needs to be part of the day-to-day operations, not viewed only as a compliance task or reporting exercise,” said IBM Consulting’s global managing partner for sustainability services, Oday Abbosh.

The report summarising the IBM survey’s findings emphasises that firms with sustainability well and truly baked-in do not spend more on environmental and social initiatives. Instead, they incorporate related considerations into operational decisions and future planning streams that are key to their core business.

A four-step process for becoming an ‘embedder’ is detailed in the report. It consists of either combining the business and sustainability strategy or ensuring complete alignment; making changes to core workflows and processes; clearly defining roles and responsibilities relating to sustainability, and including sustainability in key business decisions. This last step should be completed using accurate data to maximise impact for minimal cost.

Risks and rewards

The new analyses out this week come around a month after PwC released its latest annual CEO survey, revealing that almost half of chief executives believe that their business will cease to exist within a decade without reinvention, with the climate crisis being a major driver of physical, reputational and competition-related risks.

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.

These changes are being made not only to reduce costs and capture new markets in the near-term; they are also being made through a risk management lens.

PwC noted an increased awareness of physical climate risks and transition-related risks, but, in the near-term, the biggest perceived risks had to do with reputation. These include campaigns from NGOs, activism from investors or even legal challenges.

Indeed, two-thirds of those polled by Ashurst are anticipating an increase in legal challenges to organisations lagging on the energy transition for the remainder of the decade.

It does bear noting that not all business leaders are motivated to act by risk beyond the near-term.

The World Economic Forum’s 2024 global risks report, published to coincide with last month’s Davos summit, revealed that risk experts in the private sector were less likely to view environmental risks as imminent in the near-term than their counterparts in policymaking and civil society.

Join the conversation at edie’s online sustainable business leadership sessions

On Tuesday 5 March, edie is hosting a series of free-to-attend, back-to-back online events on topics relating to sustainability and business leadership.

These events will feature external guest experts exploring strategising for purpose-led business, closing the green skills gap and improving environmental data collection and reporting. We are delighted to have confirmed guest speakers from organisations including LinkedIn, ClimateVoice, the Science-Based Targets Initiative and the Cambridge Institute for Sustainability Leadership (CISL) among others.

For a full agenda and to register, click here.

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