Are CEOs sidelining environmental sustainability as rising costs bite?

58% of CEOs said the rising cost of energy, commodities and products is having a high impact on their firm

The results of the survey, published late last week as part of a partnership between Accenture and the UN Global Compact, captures insights from chief executives across 18 industries in 128 companies. It serves as a snapshot of the biggest challenges and risks their businesses are facing now and set to face in the future, plus the ways in which business leaders are preparing to navigate them.

Looking at the challenges facing chief executives in the present and the near-term, the biggest shared challenge is inflation and price volatility. Just 2% of those surveyed said this was having no impact on their business. 58% stated a high impact.

The competition for skilled staff came in at second, with 42% saying this was a challenge with a high impact, while 41% were still recording a high negative impact from public health impacts including the Covid-19 pandemic.

Climate change was found to be the fourth largest challenge. One-third of the CEOs said they are already experiencing a high impact from climate change, either due to physical risks across the value chain, or the need to shift business models with emissions mitigation and climate adaptation in mind for the future. Notably, the survey included the biggest proportion of chief executives in the Global South since the UN Global Compact launched this research initiative in 2007.

The report was published ahead of the start of the World Economic Forum’s (WEF) annual meeting in Davos, Switzerland. The WEF’s own analysis of global risks, in terms of likelihood and severity, put the cost-of-living crisis on top for the near-term. But environmental issues accounted for half of its top 10 risks for the near-term, and, for the coming decade, four of the five top risks are environmental, with a failure to address climate change chief among them.

Long-term vision, immediate reality

Promisingly, the survey revealed that most chief executives recognise the importance of building in resilience for the future.

It identifies a set of “ingredients for resilience”, covering strategy, workforce, the supply chain and ecosystem management, with this latter term referring to the impact businesses can have beyond their value chains.

Strategy-wise, it covers shifting to sustainable business models; setting ambitious emissions reduction targets in line with climate science; delivering a net-positive impact on nature and ensuring that investment decisions consider the full range of ESG issues.

For the workforce, it recommends investment in employee wellbeing and human rights; building a representative workforce; upskilling and reskilling staff for the jobs of the future and ensuring that leadership incentives are linked to sustainability-related outcomes.

In the supply chain priorities are improving data collection; financing supply chain transparency and engagement; embedding sustainability criteria into R&D and accelerating the adoption of clean energy.

The ecosystem management portion covers forging strategic partnerships and advocating for changes to local, national and international policy that will support a more sustainable future.

While chief executives welcome this vision, some are simply facing challenges too many – and too great – to make long-term resilience building a priority at the moment. 43% said their organisation’s their sustainability efforts have been hampered due to the geopolitical environment. This proportion increases to 51% for developing economies.

The majority of the chief executives also agreed that the wider delivery of the UN’s Sustainable Development Goals (SDGs) by their 2030 deadline will be more challenging than first anticipated, due to current challenges and their likely ripple effects into the future.

February 2022 saw the UN pledging an additional $54.5m to help developing nations to achieve the SDGs, in recognition of a trend towards backwards progress on some goals amid Covid-19. These included goals relating to public health and education. Moreover, the International Energy Agency (IEA) has repeatedly warned that, as global finance for clean energy grows, developing nations still aren’t receiving the appropriate share. The UN’s package included funding for clean energy in Madagascar and Zimbabwe.

“Despite setbacks, there is room for hope,” said the UN Global Compact’s executive director Sanda Ojiambo. “The CEOs we surveyed increasingly recognise they can build credibility and brand value by committing to the Ten Principles and the SDGs throughout their operations– not only because it’s the right thing to do, but also because it is good business sense.”

Consumer goods focus

In related news, the Consumer Goods Forum (CGF) has published its latest annual report, which it believes serves as evidence that the challenges posed by global events in 2022 “didn’t slow action” among its members on its key sustainability topics.

These include reducing food waste; tackling plastic pollution; enhancing supply chain traceability; ending deforestation and addressing human rights risks in supply chains.

On waste, the report revealed that 97% of the CGF’s 40 members have integrated its recommendations on packaging design into decision-making processes. Recommendations are designed to accelerate the phase-out of unnecessary and hard-to-recycle packaging components and formats that are often littered. The report states that the Forum is on-track to engage further with members to reduce plastic pollution across the value chain this year. It also states that the Forum has had continued success with its food waste reporting initiative, the Food Waste Atlas.