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Investment, buy-in and engagement

Engaging the entire business in sustainability initiatives has become a crucial component for any company looking to lead the charge on net zero. Internal functions need to be set up correctly in order to garner boardroom buy-in, build champions among staff and unlock investment.

As sustainability becomes an ever-more influential factor in consumer preferences and investment evaluations, strategic investment and engagement offer a distinct advantage over the competition.

Funding for sustainability remains a serious concern.

Similar to the results of the previous edie Sustainable Business Tracker survey, the respondents revealed that ringfencing money to fund sustainability remains a key challenge. Around 85% of company sustainability budgets are set below £500m, or are simply ‘unknown’ as is the case for almost a third of the firms that responded (35%).

When asked to pinpoint the biggest micro-level challenge to the success of delivering against their sustainability strategy right now, more than one-third (36%) cited a lack of funding and investment.

As our last Tracker showed, this is not just an issue for smaller, cash-strapped companies. Of the 36% of firms that highlighted a lack of funding as deterring their efforts to address ESG issues, more than half (52%) have large budgets of between £101m to more than £500m.

Gaining access to funding is challenging enough at the best of times, but given the ongoing cost-of-living crisis, many businesses may also be struggling with higher costs – both operational and across the supply chain. As such, 28% of respondents cited a short-term profitability mindset as the biggest micro-challenge. When combining all financial-related challenges (both internal and external) almost two-thirds (64%) of businesses are being hamstrung by financial constraints in the chase for profits.

Promisingly, there has been a drastic fall in the number of companies reporting a “disengaged” finance team[1] - down from 36% in the last Tracker to 13%. Indeed 48% of businesses have a “somewhat” engaged finance team. Finding more effective ways to bring finance directors on their journey will be crucial to unlocking the investments needed to turn the dial on net-zero plans and wider ESG performance. Building finance into long-term sustainability targets by utilising frameworks such as Transition Plans and the TCFD recommendations could be key to unlocking investment for low-carbon solutions.

In terms of what businesses are investing in with the limited resources they have available, energy efficiency upgrades remain the biggest priority right night – cited by 53% of respondents. Staff behaviour change measures, which can be a vital way to save on costs, are also high up the agenda (47%).

Low-carbon heating, zero-emission vehicles and supply chain investments all appear high up on the agenda for businesses and interestingly, more firms (33%) are looking at off-site clean energy measures such as corporate PPAs right now than they are onsite renewable energy options (28%).

[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.

Q. At a micro level, what do you believe to be the biggest challenge facing your organisation's sustainability strategy right now?

Lack of funding/investment

Short-term profitability mindset

Reporting and compliance

Lack of internal skills/knowledge

Policy/regulation changes

Supplier engagement

Staff engagement

Consumer engagement

Political instability is stalling corporate action

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 threat to corporate plans 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.

It may well be that businesses will be open to investing more on sustainable solutions once clearer policy guidance is in place. The Government’s u-turns on green targets for heating and electric vehicles in late 2023 were widely criticised and many businesses want confidence that long-term political goals to reach net-zero in a way that provides bespoke funding for solutions won’t suffer from market volatility as a result.

Q. At a macro level, what do you believe to be the biggest challenge facing corporate sustainability right now?

Political instability

Escalating climate change

Cost-of-living crisis

Energy price crisis

Skills gap

Growing inequalities

Armed conflict

It may well be that businesses will be open to investing more on sustainable solutions once clearer policy guidance is in place.

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

According to our respondents, who work across a range of different functions within their businesses, there are signs that senior leaders are getting more engaged with sustainability issues. The results show that a large number – 39% – of chief executives are now ‘highly engaged’ with sustainability in their business. In our last survey, 38% were said to be as highly engaged. It is a similar story for corporate board members; 88% are either ‘highly engaged’ or ‘somewhat engaged’ with sustainability, which is a similar increase from the last survey.

This is a positive trend that should unlock more understanding and resources to embed and deliver on ESG goals over the coming months.