Investment, buy-in and engagement

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 two-thirds of survey respondents have an annual budget of less than £1m for decarbonisation activities, while another 21% simply stated they did not know what their budget was. When asked to pinpoint the biggest micro-level challenge to the success of delivering against their sustainability strategy right now, 15% cited a lack of funding and investment. This may not sound like much, but it was the second most selected option behind short-term mindsets, which is the major challenge for more than one-third of businesses. When combining all internal financial-related challenges more than half (51%) of businesses are being hamstrung by financial constraints in the chase for profits. Promisingly, there has been a drastic fall in the number of companies reporting a “disengaged” finance team - down from 36% in our inaugural Tracker at the start of the year to 10%. Indeed 54% of businesses have a “somewhat” engaged finance team. 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. Building finance into long-term sustainability targets by utilising frameworks such as Transition Plans and the TCFD recommendations could be key to unlocking investment for low-carbon solutions.

Political instability is stalling corporate action

At a macro level, many external factors could also be hampering the appetite and options to invest in low-carbon solutions. One quarter of businesses cited political uncertainty as the biggest external challenge and may well be waiting on the new Government to set out its priorities with new investment policies that stimulate the market, before venturing in themselves.

While the escalating climate crisis is second on the list of macro challenges at 22%, it is followed by the cost of living crisis (21%). It seems the current economy is not an enabling one for low-carbon investment despite our audience realising the need to act. This explains the focus on quick win priorities highlighted in the previous sections of this Tracker.

The Labour Government is only a few months old but has already sought to correct some green markets and create a sense of political stability across the green agenda.

Energy Security and Net-Zero Secretary Ed Miliband has already fleshed out the new UK Government’s plans for the energy transition. This includes reinstating a requirement for landlords of domestic properties to improve their Energy Performance Certificate (EPC) rating to ‘C’. This forthcoming mandate was originally set for 2028 but was removed altogether by Sunak last September.

Miliband also made comments at the Labour Climate and Environment Forum last week on how his Government could garner local support for new grid infrastructure.

Upgrading infrastructure and adding ane grid capacity will be key if the UK is to decarbonise its electricity generation mix by 2030 – as pledged by Labour – or 2035 – as pledged by the Conservatives. The International Energy Agency (IEA) estimates that global grid spending needs to double by 2030 on the average levels of around $300bn per year seen since 2015.

Combined with the record £1.5bn budget allocation for the next Contracts for Difference (CfD) auction round for renewables, it is hoped that the market for clean energy and solutions will soon look more attractive for businesses to realign investment plans with the net-zero transition.

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 – there are signs that senior leaders are getting more engaged with sustainability issues. The results show that a large number – 40% – of chief executives are now ‘highly engaged’ with sustainability in their business. In our last survey, 39% were said to be as highly engaged. It is a similar story for corporate board members; 80% are either ‘highly engaged’ or ‘somewhat engaged’ with sustainability.

Indeed, only the HR department seems to suffering from disengagement at the moment. It was the lowest ranking department when it came to average levels on engagement with 21% either somewhat disengaged or not at all engagement with sustainability.

This is a positive trend that should unlock more understanding and resources to embed and deliver on ESG goals over the coming months.