It’s time for sustainability leadership through crisis

As the latest edie Sustainable Business Tracker survey results reveal, many of the same challenges that have dogged corporate sustainability action in recent years remain. Adapting to an evolving economic landscape underpinned by the cost-of-living crisis, and navigating an uncertain UK regulatory framework, are only exacerbating the situation as companies increasingly recognise the need to invest more aggressively in climate action, particularly in addressing Scope 3 impacts.

The survey highlighted a range of challenges and opportunities, including:

Short-term profitability continues to champion longer-term sustainability.

Most (89%) companies are actively seeking or using investment to support their sustainability and climate action efforts. However, 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.

The cost-of-living crisis is having a negative impact on sustainability budgets and long-term planning.

More respondents (18%) cited the cost-of-living crisis than climate change (14%) as the biggest macro challenge facing corporate sustainability right now. Many firms are focused on quick wins with short payback periods, which 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’).

Finance teams are still not fully engaged with sustainability.

Almost 34% of finance departments are not engaged with sustainability or climate action within their organisation.[1] A number of respondents suggested that implementing net-zero transition plans – and translating net-zero goals into financial returns – could be an effective way to positively engage the board on sustainability.

Addressing biodiversity is not yet considered to be a priority.

Despite the global biodiversity agreement shining a spotlight on nature restoration and addressing biodiversity loss, it is still not a priority for business. When asked how much of a priority their organisation is putting on a range of sustainability issues, fewer respondents placed a high priority on biodiversity than all other subjects. Just a third (33%) of respondents said biodiversity was either ‘business critical’ or ‘high priority’, compared with those that said the same about workplace diversity and inclusion (64%) or developing a climate transition plan (54%).

There is a big green skills that must be closed.

The global demand for green skills is now 40% higher than it was in 2015, and just 13% of the global workforce possess the required green skills. This lack of internal skills and knowledge was reflected by the survey results, with 11% of respondents noting the macro level skills gap as the biggest challenge facing corporate sustainability. And a similar number (12%) of respondents said that a lack of internal capability is the biggest challenge facing their organisation's sustainability strategy.

Current net-zero plans do not align with ambitions.

75% of survey responding companies plan to reach net-zero carbon emissions by 2050 or earlier. But these ambitions are not being matched by sufficient action, with just half of businesses having developed a carbon transition plan that is aligned with a 1.5 degrees Celsius scenario. Only the hospitality (62%), manufacturing (56%), IT (56%) and transportation (55%) sectors appear to be bucking this trend, albeit only marginally.

Businesses are at risk of falling behind the compliance line on climate reporting.

The survey results suggest that UK companies are not ready to comply with the incoming EU Corporate Sustainability Reporting Directive (CSRD). Just 27% of CSRD-qualifying businesses (25% of respondents) have not yet started compliance work. Worryingly, just 5% are compliant already, and 25% of companies don’t even know whether they fall under the CSRD regime at all.

Tackling Scope 3 emissions is a top priority across all sectors.

Right now, 60% of companies see Scope 3 or supplier emissions as being a ‘business critical’ or ‘high priority’ decarbonisation activity. This is especially the case for bigger companies; 70% of firms with more than 5,000 employees say addressing Scope 3 is either ‘business critical’ or ‘high priority’. Getting good data and finding ways to effectively engage with suppliers to encourage them to join in on their net zero journey remain the key challenges, as highlighted by the many comments received.

[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.