Senior executives rate threats from climate change as a top issue, second only to the uncertain economic outlook, according to Deloitte’s 2023 CxO Sustainability report. 

In the report, which is based on a survey conducted in September and October 2022, a majority (61%) of C-suite executives said climate change will have a high/very high impact on their company’s strategy and operations over the next three years.

During the past year, nearly all respondents indicated that their companies had been negatively impacted by climate change and 82% of leaders said they had been personally affected. Deloitte said this concern should serve as a catalyst for continued action on climate change. In fact, a large majority of respondents (75%) said their organisations had increased their sustainability investments over the past year. In particular, participants in the United Arab Emirates (34%), Brazil (31%), and Italy (29%) said they had increased such investments significantly. 

Leaders are also being pressured to act by various stakeholders, ranging from the board and management at the top of their organisations down to employees and customers. More than half of senior executives said employee activism on climate matters had led their firms to expand sustainability efforts. 

Regulation is another influential factor, with 65% of leaders saying it had prompted them to increase action on climate change over the past year.

Indeed, life cycle assessment (LCA) software company EcoChain (Amsterdam; www.ecochain.com) highlighted the rising number of environmental regulations and sustainability targets in Europe, such as the Ecodesign for Sustainable Products Directive (ESPR) and the Green Claims Directive. 

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“Transparent reporting on your sustainability efforts is crucial for companies to achieve their sustainability goals and develop a future-proof strategy,” said EcoChain CEO Frans-Willem de Kloet.

He added that companies need to set up a robust internal LCA system to ensure accuracy, credibility, and accessibility of their environmental data, enabling them to maintain control of their information, track improvements and perform annual footprint comparisons. 

But the results of the survey showed that while companies are taking action, they are struggling to “move the needle”. In other words, while they are using more sustainable materials, increasing energy efficiency and developing new climate-friendly products, they are less likely to be taking action to embed climate considerations into their cultures and have the senior-level buy-in and influence to effect meaningful transformation.

Deloitte said its poll revealed that more than a third of companies had not implemented more than one “needle-moving” sustainable action. Deloitte’s report makes some recommendations to bridge the divide between leaders’ ambitions and actions, and accelerate progress to a green transition. 

First is to embed climate goals into the company’s overall strategy and purposes. By developing a holistic view of their sustainability goals, senior management can reduce or eliminate shareholder dissonance, Deloitte said. 

Building trust by taking credible climate actions is another step in the right direction. The survey uncovered leaders’ scepticism about both private sector and government commitments to address climate change, but Deloitte said companies can fight against such distrust by ensuring the data they report is relevant and reliable.

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Boards must also be empowered to guide their businesses to a more sustainable future and capture long-term views in their decision-making. But, said Deloitte, they must know the right questions to ask and where to push to find robust solutions. 

And companies cannot act on their own, so collaboration with local and national governments, as well as suppliers and business partners, is essential to support climate initiatives and achieve objectives. 

One barrier to greater action is balancing the near-term costs of climate action with the long-term benefits. Deloitte’s advice is to consider the long-term opportunity. According to the consultancy’s research, climate inaction could cost the global economy USD 178 tn (EUR 163 tn) over the next 50 years, whereas a rapid acceleration to net zero could see a gain of USD 43 tn. 

So, while investing in necessary change may cause temporary financial discomfort now, Deloitte said effective investments will pay off in the long run, especially as demand for sustainable products and services increases. 

The survey was conducted with 2,016 C-suite executives across several industry sectors: consumer; financial services; technology, media and telecom; energy, resources and industrials; and life sciences and healthcare. Respondents were from 24 countries: 48% from Europe, the Middle East and South Africa; 28% from the Americas; and 24% from Asia-Pacific.