• Thursday, March 28, 2024
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What 1,000 CEOs Really Think About Climate Change and Social Inequality

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To solve the world’s biggest challenges, such as climate change and persistent economic inequality, the business community will have to play a critical role. And we need chief executives who understand the challenges and want to drive deep change in the way businesses operate. Last month, nearly 200 CEOs declared, through the Business Roundtable, that the purpose of business is no longer just maximizing shareholder profit. But are they ready to follow through?

Recently a new and important study on CEO attitudes came out, and it sheds light on how chief executives think about sustainability and other global challenges. Written by Accenture and the United Nations Global Compact, “The Decade to Deliver: A Call to Business Action” collects insights from more than 1,000 global executives. Published every three years, this report provides a deep dive on how CEOs view sustainability.

The underlying context for this year’s report is the fact that the world is running out of time on climate change. Last year’s study from the Intergovernmental Panel on Climate Change gave us all until 2030 to cut emissions in half to avoid some of the worst outcomes.

The new report revolves around a single idea: we’re not moving fast enough. As one of the lead authors, Jessica Long, Accenture’s Managing Director for Strategy and Sustainability, told me, “The study is meant to be a call to action. Lots of good work is going on, and companies are making more commitments. But current activity and statements without action just won’t get us to 2030.”

As I read through the report, I found myself moving key insights and data into four categories:

NOT TOO SURPRISING: Business leaders feel pressure to build more sustainable enterprises from key stakeholders. Customers and employees were the top two vote-getters when the CEO’s were asked which stakeholders would most influence the way they manage sustainability. Within those stakeholder groups, Millennials and Gen Z, in particular, want the companies they work for and buy from to stand for something. And these demands increasingly seem non-negotiable. Mark Hunter, President and CEO of Molson Coors, says, “Our consumers and our customers are looking for assurances that we are doing business the right way. It’s becoming table stakes.”

The other area that was no surprise to me was the tension CEOs feel about the perceived trade-offs between sustainability and traditional financial metrics. While I feel that this tension has always been overstated — sustainability creates business value in multiple ways — there is a real tension between short-term profit and long-term value. And in fact, more than half the CEOs say “they face a key trade-off in the pressure to operate under extreme cost-consciousness while seeking to invest in longer-term strategic objectives.”

SURPRISING: An amazing 88% of the CEOs “believe our global economic systems need to refocus on equitable growth.” Concerns about economic inequality have moved from the “Occupy Wall Street” protests a decade ago into the mainstream. As one CEO said, “Unleashed capitalism has created extreme poverty, terrible social conditions and a difficult situation for our planet. If we cannot manage a better social transition of wealth, we will be in trouble.”

In addition, some of the results on how sustainability creates value sounded a bit odd. As the authors say, “CEOs recognize that sustainability can drive competitive advantage,” but fairly low numbers of respondents cited specific value creation: 40% see revenue growth and just 25% cost reduction (which might simply reflect the fact that the easy wins are all gone). That revenue number doesn’t completely gibe with another statistic; when talking about barriers to implementing sustainability, only 28% of CEOs cite the “absence of market pull.” That’s a pleasant surprise after years of complaints that the demand for sustainable products is weak.

PROMISING AND REASSURING: Sustainability is firmly on the agenda now, and that’s a victory many years in the making (trust me). All of the large company CEOs (O.K./ 99%), agree that “sustainability issues are important to the future success of their businesses.” And fully 94% feel a personal responsibility for laying out their company’s core purpose and role in society. Only a quarter of the CEOs cited “no clear link to business value” and merely 8% said “lack of knowledge” was a problem.

One other clear theme emerged around trust and the expectations of society. Three-quarters of CEOs said citizen trust would be critical to competitiveness.

STILL WORRYING: Four key findings concern me. First, for all the silver linings, the report’s overall theme is that we’re not doing enough fast enough to achieve the Global Goals (formerly the Sustainable Development Goals, or SDGs), the UN’s guidelines on the targets we need to hit to build a thriving world.

Second, business and the world are not doing enough on climate change. While 59% say they’re deploying low-carbon and renewable energy sources, only 44% see a net-zero future for their company in the next decade. And just 41% are decarbonizing their supply chains.

Third, the survey showed a limited belief in investors. No matter what the BRT statement says, most companies won’t act aggressively unless they believe investors value their sustainability efforts. Only 12% of the CEOs cite pressure from shareholders as a motivation.

Finally, the CEOs cite political and economic uncertainty as big distractions. For me this highlights the long-standing disconnect on sustainability; the implicit assumption that it’s a distraction from “real” business rather than the path to profit and building thriving businesses. And, to be blunt, if leaders are waiting for less volatile times to act on climate change, they’ll wait forever.

This study paints a mixed picture, much like the real world, these companies are operating in. We’ve seen progress, but we have serious gaps and a lot remains to be done. I do take comfort in the fact that leaders now recognize that we’re falling short, that these issues are incredibly complex, and that we need more real action.

To buy into a new vision of business, CEOs need to connect to it as people and write it into their own interior narrative explaining how their work fits into the world. They need to ask: What’s my legacy? And that’s a good question for all of us.

Andrew Winston advises some of the world’s leading companies on how they can navigate and profit from environmental and social challenges