Sustainability leadership must learn to thrive in an environment of uncertainty

Businesses are facing a perfect storm of external factors that are debilitating efforts to reach net-zero through long-term decarbonisation, mapped out through Climate Transition Plans.

The cost-of-living crisis has seen many organisations switch to short-term mindsets which makes investing in projects with longer payback periods far less attractive to the board. The swelling resource requirements for a seemingly never-ending conveyor belt of disclosure frameworks are stretching sustainability teams, and the political uncertainty as many nations wait for election seasons to kick in is only adding to the stagnation of tangible climate action.

Adding to this, businesses are waiting to see how amendments to the SBTi’s frameworks – considered by many to be the gold standard for long-term climate targets – which is only adding to the sense of uncertainty.

Still, edie’s latest Business Tracker shows that many corporates are forging ahead with plans to showcase sustainability leadership. Among the survey highlights, we found a range of challenges and opportunities for sustainable business, including:

Funding for sustainability remains a serious concern.

At a micro-level, lack of funding and investment is the overwhelming challenge facing businesses right now, highlighted by 33% of sustainability professionals. This was followed closely by “short-term profitability mindsets” (26%), suggesting that many businesses are focusing on the bottom line during this trying economic environment, rather than investing in long-term decarbonisation solutions.

It is not just an issue for smaller, cash-strapped companies. Of the 59% of firms that highlighted a lack of funding or a short-term profitability mindset as deterring their efforts to address ESG issues, more than half (52%) have large budgets of between £101m to more than £500m. That some companies (33%) still have a disengaged[1] finance team is not making the situation any easier for sustainability departments.

Political uncertainty is hampering corporate climate ambitions

Unsurprisingly, the escalating climate crisis remains the biggest macro-challenge cited by sustainability professionals. At 27%, responding to the climate crisis is the biggest external mitigation plan for corporates right now, according to our survey.

The climate crisis shares the top spot with political uncertainty (also chosen by 27% of survey respondents), followed closely by the cost-of-living crisis (22%). It is looking increasingly likely that it is a case of “when” and not “if” a General Election will be called. Given that green policies have been a contentious voting point, with the Conservatives rolling back on certain green frameworks in a bid to appease parts of the public, it is no surprise that many businesses feel that their long-term climate plans are being shackled by a volatile, uncertain political environment. It is hoped that the results of the General Election can act as the bedrock for accelerated climate action in the UK moving forward.

Businesses want much more guidance on science-based targets

More than half (53%) of survey respondents have set science-based targets and of those, 58% have had such targets validated by the SBTi. However, there is a strong belief amongst the business community that guidance on delivering net-zero targets is not strong enough.

In total, 46% of businesses do not believe that the guidance on net-zero targets is sufficient to enable them to reach their goals, compared to 30% who believe the guidance is strong enough. Additionally, only 23% of corporates believe there is enough sector-specific guidance to help them deliver net-zero goals.

Businesses are reluctant to invest in carbon offsetting

One of the major pieces of guidance that businesses are waiting on is whether the SBTi will allow the use of more carbon credits for corporate net-zero strategies as part of consultations later this summer. Currently, 60% of businesses believe that the carbon markets are currently “too risky” to invest in.

There are emerging signs that senior management is engaging with sustainability.

A large number – 38% – of chief executives are now ‘highly engaged’ with sustainability in their business. In our last survey, 41% were said to be as highly engaged. It is a similar story for corporate board members; 87% are either ‘highly engaged’ or ‘somewhat engaged’ with sustainability, which is a small increase from the last survey. Finance departments are also slowly getting to grips with sustainability, with 48% of respondents stating that the function is “somewhat” engaged with sustainability.

[1] ‘Not engaged’ or ‘disengaged’ refers to the percentage of respondents that said their department was either ‘Not at all engaged’, ‘Somewhat disengaged’ or ‘Neither engaged nor disengaged’ with sustainability.