When it comes to CxO priorities, climate change has become a top issue, said Deloitte recently when releasing its 2023 CxO Sustainability Report: Accelerating the Green Transition.
The report is based on a survey of 2,016 C-level executives from 24 countries conducted by KS&R Inc. and Deloitte, during September and October 2022.
When asked to rank the issues most pressing to their organisations, many respondents rated climate change as a “top three issue,” ahead of seven other CxO priorities, including innovation, competition for talent, and supply chain challenges, Deloitte said.
Only economic outlook ranked slightly higher in terms of CxO priorities, the firm pointed out.
In addition, 75% of CxOs said their organisations have increased their sustainability investments over the past year, nearly 20% of whom said they’ve increased investments “significantly”, the firm added
Almost every CxO surveyed said their organisation has felt the impacts of climate change over the past year.
CxOs reported “resource scarcity/cost of resources” as the top issue already impacting their companies (46%), while 45% highlighted “changing consumption patterns or preferences related to climate change” and 43% reported “regulation of emissions” as other top issues impacting their companies.
About a third of executives said climate change is negatively affecting their employees’ physical (37%) and mental (32%) health.
There’s also a personal aspect 82% of executives said they have been personally impacted by climate events over the past year, with extreme heat the most frequently cited issue, and 62% said they feel concerned or worried about climate change all or most of the time.
Despite these concerns, 78% of leaders are “somewhat” or “extremely” optimistic the world will take sufficient steps to avoid the worst effects of climate change, and 84% agreed/strongly agreed that global economic growth can be achieved while also reaching climate change goals.
68% of CxOs said they feel a large-to-moderate degree of pressure from each of the following groups: board members and management, regulators and government, and consumers and clients.
Organisations are also feeling pressure from their shareholders and investors (66%), employees (64%), and civil society (64%).
Employee activism is specifically driving increased action, with more than half of CxOs saying employee pressure on climate matters led their organisations to increase sustainability actions over the last year.
24% said employee activism led to a “significant” increase. Regulation is also influential: 65% of CxOs said the changing regulatory environment led their organisations to increase climate action over the last year.
In line with last year’s report, CxOs chose brand recognition and reputation, customer satisfaction, and employee morale and well-being as three of the four top benefits of their companies’ sustainability efforts.
The lowest-ranked benefits (all financial) suggest CxOs continue to struggle to define the longer-term financial opportunities that sustainability measures offer.
Organisations are taking action: 59% are using more sustainable materials, 59% are increasing the efficiency of energy use, 50% are training employees on climate change, and 49% are developing new climate-friendly products or services.
They are also ramping up climate adaptation efforts: 43% are updating or relocating facilities to make them more climate change resistant; 40% are purchasing insurance coverage against extreme weather risks; and 36% are offering financial assistance to employees who have been impacted by extreme weather.
However, as seen last year, companies are less likely to implement actions that demonstrate they have embedded climate considerations into their cultures and have the senior leader buy-in and influence to effect meaningful transformation.
For example, 21% of CxOs indicated their organisations have no plans to tie senior leader compensation to environmental sustainability performance, and 30% said they have no plans to lobby government for climate initiatives.
When asked how serious certain groups are about addressing climate change, only 29% of CxOs said they believe the private sector is “very” serious.
Nearly a quarter of CxOs said the difficulty of measuring their organisations’ environmental impact was a top barrier to increased action, and nearly one-fifth cited cost and focus on near-term issues as barriers.
While many organisations are concerned about a “just transition”—which seeks to ensure the substantial benefits of transitioning to a low-carbon economy are shared widely and support those who stand to lose economically—prioritisation of this issue varies considerably by region and country.
The Asia Pacific region is especially focused on a just transition, while some European countries and the US are less likely to see this issue as a priority.