Sustainability leadership must learn to thrive in an environment of uncertainty

Businesses are facing a perfect storm of external factors that is debilitating efforts to reach net-zero through long-term decarbonisation mapped out through Climate Transition Plans.

The cost-of-living crisis has seen many organisations switch to short-term mindsets which makes investing in projects with longer payback periods far less attractive to the board. The swelling resource requirements – both time and costs – to comply with regulation and disclose to voluntary investor demands are stretching sustainability teams. While the UK’s new Government has moved to showcase its commitment to sustainability through new investment plans, many businesses will feel they’re looking over their shoulder at data, rather than forward toward their net-zero targets beyond 2030.

Adding to this, businesses are waiting to see how amendments to the SBTi’s frameworks – considered by many to be the gold standard for long-term climate targets – with a fresh evidence report on the role of carbon credits adding more confusion around how businesses should approach the net-zero transition.

Still, edie’s latest Business Tracker shows that many corporates are forging ahead with plans to showcase sustainability leadership. Among the survey highlights, we found a range of challenges and opportunities for sustainable business, including:

New Government, same uncertainty for businesses

At a macro-level, political uncertainty was highlighted as the second-biggest challenge facing corporate sustainability right now, along with the cost-of-living crisis. edie’s Sustainable Business Tracker survey was launched two weeks after the results of the General Election and while the new Labour Government has been quick to implement some positive green changes, many businesses are still awaiting long-term clarity that net-zero is the unmoving and overwhelming direction of travel.

At a time when the US elections could also impact global climate negotiations ahead of COP29 in Azerbaijan in November, it is unsurprising that so many businesses find political uncertainty a challenge. Indeed, 16% of respondents selected this as the biggest macro-challenge they are dealing with right now, second only to escalating climate change.

Short-termism is hampering investment in climate solutions

As part of the survey, edie asked its audience of sustainability and energy professionals to list their major micro-level challenges that are impacting sustainability right now. Across a list of issues such as reporting and compliance, supplier engagement and the skills and knowledge gap one major issue stands out: short-term profitability mindset.

With the cost-of-living crisis cited by 16% of respondents as their biggest macro challenge, it is unsurprising to see so many businesses focus back on those quarterly profits in the balance sheets. Short-termism was cited by 26% of sustainability professionals as the biggest micro-challenge right now. The biggest challenge was a lack of funding and investment, cited by 33%.

It is not just an issue for smaller, cash-strapped companies. Of those 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 some companies (20%) still have a disengaged[1] finance team is not making the situation any easier for sustainability departments.

Political uncertainty is hindering corporate climate ambitions

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.

Majority of businesses unequipped to cater to reporting demands.

This report's major focus is that of reporting and disclosure and the latter sections go into greater detail as to why this is such a challenge for businesses right now. At a glance, it is clear that sustainability professionals are frustrated by the imbalance between complying with legislation and disclosure and the tools and expertise they have to do so.

More than half (52%) of survey respondents do not believe their team is “adequately resourced to deliver reporting and disclosure requirements”. While this is creating confusion and challenges in the short-term, the overwhelming majority of respondents (80%) do believe that reporting and disclosure Is helping their aim of driving climate action.

[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.