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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. Engagement empowers businesses to lessen their exposure to environmental hazards, navigate evolving regulatory frameworks, and cater to the expanding preferences of more environmentally conscious consumers. It can stimulate creativity, propelling the development of greener solutions, thereby amplifying productivity and curbing future expenses. As sustainability becomes an ever-more influential factor in consumer preferences and investment evaluations, such strategic investments 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 80% 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 (28%).
When asked to pinpoint the biggest micro-level challenge to the success of delivering against their sustainability strategy right now, more than half (52%) of respondents highlighted finance-related concerns. 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.
The fact that most respondents bemoaned the lack of long-term strategic investment in favour of quick, short-term returns suggests many companies are being hamstrung, unable to make real progress and instead turning to quick-win projects, such as making energy efficiency upgrades. Upgrading lighting and heating to improve energy performance in sites, offices and facilities remains ‘high priority’ or ‘business critical’ for 46% and 10% of respondents respectively. In fact, investing in energy efficiency is understandably a priority, regardless of sector and regardless of a company’s allocated sustainability budget. Even where a firm has a budget of between £500m and £1m, 80% of respondents pointed to energy efficiency upgrades as being a ‘high priority’.
The fact that many companies (36%) still have a disengaged[1] finance team is not making the situation any easier for sustainability departments. Finding more effective ways to bring finance directors on their journey will be crucial to unlocking the investments needed to really turn the dial on net zero plans and wider ESG performance. As many respondents noted during the last survey, finding innovative ways to better connect financial returns with transition plans and climate risk factors will be key.
[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?
Short-term profitability mindset
Lack of funding/investment
Supplier engagement
Staff engagement
Staff engagement
Policy/regulation changes
Policy/regulation changes
Consumer engagement
Finance is not just a problem for smaller companies - it is a major worry for large firms too.
A disengaged finance team is not making the situation any easier for sustainability departments.
The cost-of-living crisis shows no sign of easing, particularly for retailers
Unstable energy and food prices are continuing to have an impact on the disposable income levels across the UK. And this presents a significant ongoing challenge for companies trying to find the right balance between business-as-usual and making real progress on sustainability.
The cost-of-living crisis was ranked the second biggest macro challenge affecting their company’s ability to deliver sustainability right now. And more companies cited the issue as being the biggest challenge than they did last time round (25% vs 18%). Renewed political and civil unrest across the Middle East understandably resulted in more respondents (27% vs 20%) pointing to political unrest as the biggest macro challenge facing corporate sustainability.
Of the 32% of responding companies that are most concerned about the cost-of-living crisis and energy price rises, a quarter of them work within the retail and hospitality sectors – industries which continue to be hardest hit by consumer spend across the UK.
Q. At a macro level, what do you believe to be the biggest challenge facing corporate sustainability right now?
Political instability
Cost-of-living crisis
Escalating climate change
Skills gap
Energy price crisis
Armed conflict
Other
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 – including sustainability and CSR (46% of respondents) and energy management (6%) to procurement (5%) and marketing and communications (4%) – there are signs that senior leaders are getting more engaged with sustainability issues. The results show that 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.
Q: How engaged are each of the following departments with sustainability and climate action in your organisation?
Chief executive
Marketing
Operations
Corporate board
Corporate board
HR
Legal
Finance
The UN COP28 conference, which took place between the two surveys, might have had an impact, stimulating interest and ambition among senior execs. Incoming regulation, designed to get companies thinking about how their business operations might be impacted by climate change, could also be having an impact. Most respondents (66%) are putting a medium-to-high priority on climate-related financial disclosure right now, with many charged with understanding their climate risk position as part of their Task Force on Climate-related Financial Disclosures (TCFD) commitments – and their chief executives will have oversight of that activity. Similarly, corporate boards will increasingly be involved in developing climate transition plans (which almost a third of respondents see as a ‘high priority’).
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