Addressing the ambition to action gap

Investing in projects with longer payback periods is still a struggle. And incoming enhanced disclosure requirements, while helping to build senior level engagement, are eating into the resources of already overstretched sustainability teams.

Among the survey highlights, we found a range of challenges and opportunities for sustainable business, including:

Funding for sustainability remains a serious concern

More than half (52%) of respondents highlighted finance-related concerns when asked to pinpoint the biggest micro-level challenge to delivering against their sustainability strategy. And it is not just an issue for smaller, cash-strapped companies. Of the 23% 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 many companies (36%) still have a disengaged[1] finance team is not making the situation any easier for sustainability departments.

More companies are prioritising tackling Scope 3 emissions

It is no surprise that an increasing number of respondents say they are placing greater importance on addressing Scope 3 emissions as part of their decarbonisation activity. The issue is now a ‘business-critical’ priority for 22% of businesses, compared with 16% that said the same in the last survey. Supply chain emissions reduction appears to be especially important to larger companies, with 77% of firms with more than £500m in turnover claiming that addressing Scope 3 is either ‘business critical’ or ‘high priority’.

There is still a gap between ambition and transition planning on net zero

67% of survey respondents confirmed they have made a public commitment to reach net zero before 2050. But just 55% of companies have a plan in place that will be sufficient to get there in line with a 1.5C scenario.

There are emerging signs that senior management is engaging with sustainability

A large number – 44% – 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; 81% are either ‘highly engaged’ or ‘somewhat engaged’ with sustainability, which is a similar increase from the last survey.

Reporting frameworks are largely seen as a compliance exercise

While an alarming number of companies still don’t know if they must comply with the incoming EU Corporate Sustainability Reporting Directive (CSRD) (19%), only 3% of those that do qualify report not having started compliance yet and 16% of them are well under way.

Of course, mandatory reporting frameworks like the CSRD don’t apply to every business. This is reflected by the more than 51% of respondents claiming CSRD compliance to be ‘no’ or ‘low’ priority right now. But even fewer companies think following non-mandatory non-financial disclosure frameworks and recommendations is important. This suggests reporting on climate-risk is very much a compliance exercise, as opposed to a useful tool to de-risk business operations, build resilience and improve sustainability performance.

[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.