The prioritization of sustainability among CEOs has dropped amid challenges

09 October 2024 Consultancy-me.com

There had been a decline in the prioritization of sustainability on the part of CEOs, according to a global Bain & Company report. That comes as other areas of focus such as artificial intelligence, growth, inflation, and geopolitical uncertainty have floated to the top of agendas.

If companies around the world slow their action on sustainability, it could come with a pretty high cost. Research from Bain & Company has found that if global temperatures increase by only 2 degrees Celsius, it could slash around $6 trillion from the path of the world economy.

And that is 2 degrees more than current temperatures, which have already risen from pre-industrial levels. It goes without saying that the accompanying damage to societies, nature, and biodiversity would be equally severe.

The prioritization of sustainability among CEOs has dropped amid challenges

Source: Bain & Company analysis

While sustainability remains an essential topic on the agenda of CEOs, some kind of ‘sustainability fatigue’ seems to be creeping into their agendas. Across the board, says Bain & Company’s report, leaders are finding that sustainability transformation does not come as quickly or easily as they initially planned for.

High costs and uncertain return on investment are two more major factors that have caused CEOs to hit the brakes on sustainability goals. Additional costs related with sustainability transformation have to either come from budgets or must be passed onto consumers. Many industries have very thin margins and for that reason, limited room to maneuver.

What do consumers think?

The finding that CEOs have been shifting focus away from sustainability is however in sharp contrast to what consumer think and want. For the same report, Bain & Company surveyed 19,000 consumers worldwide, finding that around 60% are more concerned about climate change than they were two years ago.

The prioritization of sustainability among CEOs has dropped amid challenges

Source: Bain & Company analysis

That disparity between consumers and business leaders comes from companies juggling too many difficult concerns at once. There is huge pressure in a wide range of industries to invest big on AI, to prioritize growth, and to take bold steps to control the disruption caused by inflation and geopolitical uncertainty.

Lowering carbon emissions

The analysis from Bain & Company found that around 36% of companies are behind on their Scope 1 and 2 targets, with 51% behind on their Scope 3 targets. Scope 3 emissions are those that are further down the supply chain and not directly controlled by a company, which makes them far harder to target.

The prioritization of sustainability among CEOs has dropped amid challenges

Source: Bain & Company analysis

In recent years, there has been a surge in corporate commitments to cutting carbon emissions around the world. While that is an objectively positive development, mere commitments no longer set companies apart – they must be able to demonstrate that they are making progress on their goals.

Further reading: What every CEO should ask and do to drive sustainability.

“As extreme weather events become more frequent and disruptive, consumers are no longer passive observers – they’re feeling the impact firsthand and are demanding that businesses step up,” said Akram Alami, senior partner at Bain & Company in the Middle East.

“This heightened awareness is reshaping the market, where sustainability is no longer a ‘nice-to-have’ but a crucial factor for long-term success. Companies that fail to integrate sustainability into their strategies risk not only their reputations but also their competitive edge in an increasingly eco-conscious marketplace.”

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