By Joe Ucuzoglu, Deloitte Global CEO and Jennifer Steinmann, Deloitte Global Sustainability & Climate Practice Leader
Climate change ranks as a top priority for C-level executives (CxOs) in Deloitte’s latest survey, with 75% reporting that their organizations increased sustainability investments over the past year in spite of economic and geopolitical uncertainties.
If there was any doubt that climate change is an enduring part of the business agenda, 2022 should have put it to rest. Around the globe, we experienced a growing number of weather-related events that impacted people, businesses, and economies. At the same time, we saw increasing alignment across the business community around the need to address climate change and share a responsible path toward a decarbonized economy. According to Deloitte’s 2023 CxO Sustainability Report, while CxOs faced a number of challenges over the last year—including economic uncertainty, geopolitical conflict, supply chain disruptions, and talent shortages—concern over climate change continues to be a top priority for their organizations. And they are taking action to address it.
In Deloitte’s survey of more than 2,000 CxOs across 24 countries, almost all respondents indicated their organizations were negatively impacted by climate change in some way over the last year. More than 80% of CxOs said they have been personally impacted, and 62% said they feel concerned about climate change all or most of the time. Many CxOs rated climate change as a “top three issue,” ahead of seven others, including innovation, competition for talent, and supply chain challenges. In fact, only economic outlook ranked slightly higher.
Optimism endures despite heightened concern around climate impact
Consistent with conversations we’ve had with business leaders, the majority of CxOs (78% of those surveyed) remain optimistic that the world will take sufficient steps to avoid the worst impacts of climate change. They also share a sense of urgency to take action. The good news is that even as we look ahead to an uncertain economic cycle in the year to come, C-suite leaders remain committed to investing in sustainability and climate change initiatives.
Many CxOs (61%) said climate change will have a high/very high impact on their organization’s strategy and operations over the next three years. In addition, 75% said their organizations increased their sustainability investments over the past year. There is also broad recognition that progress towards solutions will require collaboration across the entire ecosystem of private, public, and non-profit organizations.
According to Deloitte’s survey, organizations are feeling pressure to act from across their stakeholder groups, including the board and management, customers, and employees. More than half of CxOs said employee activism on climate matters has led their organizations to increase sustainability actions over the last year. Regulation is also influential, with 65% of CxOs saying that the changing regulatory environment has led their organization to increase climate action.
Climate action continues, but challenges remain
Organizations 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 we saw in last year’s report, while organizations are taking action, inconsistencies and gaps remain. For example, 21% of CxOs indicate their organizations have no plans to tie senior leader compensation to environmental sustainability performance, and 30% say they have no plans to lobby government for climate initiatives.
Additionally, when asked their views on how serious certain groups are about addressing climate change, only 29% of CxOs said they believe the private sector is “very” serious. And only 46% say that ensuring a “just transition”* is “extremely important” to their organizations, and the view of its importance differs greatly by region and country.
Recommendations to accelerate the green transition
Deloitte’s 2023 survey shows that CxOs believe that both their organizations and the global economy can continue to grow while reaching climate goals and reducing greenhouse gas emissions. However, there continues to be a gap between actions and impact, as organizations are slower to implement the “needle-moving” actions that embed sustainability into the core of their strategies, operations, and cultures.
So, how can CxOs help close the gap between ambition and impact, break through the barriers to greater action, and start to balance the near-term costs of climate initiatives with the long-term benefits?
Deloitte’s report offers several recommendations to help C-suite executives get started, including embedding climate goals into their business’s overall strategy and purpose, building trust by taking credible climate actions, empowering the board, encouraging stakeholder action, investing in today’s (and tomorrow’s) technologies, and collaborating to drive systems-level change.
Business leaders have a once-in-a-generation opportunity to reorient the global economy for more resilient long-term prosperity. It is promising to see that C-suite leaders are making sustainability a priority and increasing their investments to help lead the way. Together, we can build vibrant economies that are sustainable well into the future.
*A just transition seeks to ensure that the substantial benefits of transitioning to a green economy are shared widely, while also supporting those who stand to lose economically—whether countries, regions, industries, communities, workers, or consumers.