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Investment, buy-in and engagement
Investing in sustainability enables companies to mitigate environmental risks, adapt to changing regulatory landscapes, and meet the growing demands of socially conscious consumers. It fosters innovation, driving the development of eco-friendly technologies and practices, enhancing operational efficiency and reducing long-term costs. Such investments offer a competitive edge, as sustainable practices increasingly influence customer choices and investors’ decisions.
However, securing internal funds remains a challenge for the vast majority of companies, as highlighted by the survey results.
Funding sustainability is a major challenge, with many businesses too focused on short-term profitability over longer-term sustainability.
The vast majority (89%) of respondents are actively seeking or using investment to support their sustainability and climate action efforts. And more than half (51%) of companies are looking to secure funding for projects from internal sources, by engaging with their finance departments and boards, compared with those seeking government grants (19%), private investment (11%) or bank loans (5%).
Q. Which of the following sources of funding is your organisation actively using or pursuing to support its sustainability and climate action strategy?
Internal funding from the board
Private investors
Banks
Angel investors
Government funding/grants
Crowdsourcing
None of the above
The vast majority of respondents are actively seeking or using investment to support their sustainability and climate action efforts.
Focusing on the short term is a big problem.
But there are two clear barriers for those looking for financial support for sustainability projects: Short-term profitability, and a lack of funding.
When asked to pinpoint the biggest challenge facing their organisation’s sustainability strategy right now, 20% of respondents said that an internal mindset focused on short-term gains was holding back progress. A similar number (13%) suggested that too little money is being made available for sustainability, possibly as a result of wider cutbacks across the business.
This was a similar story across sectors, and the investment struggles appear to be the same regardless of company size.
Q. At a micro level, what do you believe to be the biggest challenge facing your organisation's sustainability strategy right now? Please select one micro challenge.
Lack of funding/investment
Reporting and compliance
Policy/regulation changes
Staff engagement
Consumer engagement
Short-term profitability mindset
Lack of internal skills/knowledge
This shows a lack of strategic foresight. When decisions are solely focused on short-term profits, businesses may overlook investments in innovation, research, and sustainable practices critical for future success. This can lead to a loss of competitive edge, hindered adaptability to market shifts, and an inability to anticipate and prepare for industry changes. Short-term thinking also fosters a culture of quick fixes, sometimes at the expense of quality or ethical considerations.
The cost-of-living crisis is having a negative impact on sustainability budgets and longer-term planning.
The UK’s cost-of-living crisis is taking its toll on UK companies. Disposable income among consumers is diminishing, causing a shift in spending behaviour and reduced demand, which is impacting sales and revenue. The rising cost of essentials such as energy and transportation, is also having a direct impact on operating costs, with higher overheads squeezing profit margins and leading to cost-cutting measures, limiting investment in innovation, expansion and growth.
The situation is reflected in the survey responses, with more respondents citing the current cost-of-living crisis than climate change as the biggest macro challenge facing corporate sustainability efforts. While 14% of people noted ‘escalating climate change’ as a key challenge, almost 18% acknowledged the cost-of-living crisis, alongside political instability (20%), the skills gap (8%), energy prices (3%) and growing inequalities (3%).
Q. At a macro level, what do you believe to be the biggest challenge facing your organisation's sustainability strategy right now? Please select one macro challenge.
Escalating climate change
Cost of living crisis
Energy price crisis
Armed conflict
Growing inequalities
Political instability
Skills gap
Mass urbanisation
It appears that many companies are tightening the purse strings and focusing on quick wins with short payback periods while they weather the storm associated with higher inflation and rising prices. This might explain why measures including energy efficiency and staff behaviour change programmes are being prioritised (with 60% and 55% of respondents seeing them as ‘business critical’ or ‘high priority’ respectively) over measures that demand more investment, such as onsite renewables (deemed by just 39% to be either ‘business critical’ or ‘high priority’) or smart grid/flexibility technologies (acknowledged by just 17% to be either ‘business critical’ or ‘high priority’).
However, in hospitality, manufacturing and education sectors, investing in onsite renewable energy does appear to be a priority, with 75%, 56% and 50% of respondents respectively claiming it to be either ‘business critical’ or ‘high priority’ for their organisation.
Finance teams are still not fully on board with sustainability.
Almost 34% of finance departments are not engaged with sustainability or climate action within their organisation.[1] The situation is more acute within the media, banking and manufacturing industries, where 55%, 50% and 50% of respondents claim to have a disengaged finance department.[2]
The survey results indicate there is room for improvement when it comes to engaging finance teams and the board, and there is a big opportunity for sustainability teams to double-down on their efforts to convince those that hold the purse strings of the importance of investing in ESG issues. They will need to find specific ways to engage, using language and examples that encourage finance professionals to sit up and take notice. Among the comments received, a notable number of respondents pointed to the fact that implementing net-zero transition plans – and translating net-zero goals into financial returns – is one way to positively engage the board on 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.
[2] ‘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.
“Our organisation needs to be more ambitious and take risks, but finance is not built for that.”
“There is a lack of ambition from the CFO, who manages the environmental sustainability team and has been blocking any progress for the last five years.”
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