Businesses revise climate targets as reality of long-term sustainability transformation hits

• Sustainability progress plateaus as short-term pressures and external forces hit CSO agenda
• Businesses look to extend commitment targets, with median deadlines for climate change commitments shifting back by 14 years to 2050
• Despite challenges, research identifies important accelerators of change through transformational CSOs, new technology and increased c-suite collaboration

As the world gears up for United Nations Framework Convention on Climate Change (UNFCCC) COP28, EY has published its 2023 Sustainable Value Study, surveying over 500 chief sustainability officers (CSOs) and equivalents representing companies with revenues over US$1b around the world.

In the survey, businesses report progress on sustainability has slowed, with a decline in progress on greenhouse gas (GHG) emissions reductions to a median of 20%, compared to 30% in 2022. Many businesses surveyed are also extending their target deadlines for achieving their climate goals with the median year shifting from 2036 to 2050, requiring large scale investment, planning and cross sector collaboration.

Rising inflation and geopolitical turbulence is impacting businesses’ ability to accelerate sustainability efforts with only 34% of those surveyed planning to spend more to address climate change, down from 61% in 2022.  Furthermore, the number of actions that organizations are taking relating to climate change has also fallen from an average of 10 in 2022 to just four, out of a possible 32 benchmarked in the survey.

Despite the challenges, the survey highlighted that delivering on sustainability initiatives has significant financial benefits, with 52% of those surveyed experiencing financial value exceeding their expectations. Additionally, 63% of respondents witnessed better than expected improvements in product and brand value.

Amy Brachio, EY Global Vice Chair of Sustainability, said: “The leading pacesetters are showing that persistence pays off, with more value being realized from their investment and action.

“Amidst the backdrop of unprecedented geopolitical tensions, sustainability leaders are facing clear challenges with resource allocation, but we cannot afford collective efforts to slow when the stakes are so high.

“The Global Stocktake makes clear that bold collective action is needed from both public and private sector. While short-term pressures persist, CSOs in all sectors need to be doubling down on driving long term investment and movement on their sustainability commitments and adopt the meticulous planning required to achieve our net zero goals. To do this, CSOs need to articulate a clear vision and effectively showcase the competitive advantage and financial value that can be derived from delivering on an ambitious sustainability strategy”

Widening gap between “pacesetters” and “observers” as fewer organizations make public commitments

As gains become harder to make, fewer organizations are leading the charge on climate action.  Only 7% of those surveyed qualify as “pacesetters” - organizations taking the most action on climate change - compared to 32% in 2022.

The gap between “pacesetter” companies and “observers”, those taking the least action on climate change, continues to widen. 95% of “pacesetter” organizations continue to have public climate commitments, yet among “observers” this has dropped to 67%. Indeed, the number of organizations reporting not making public commitments has tripled compared 2022.

However, external market demand for climate action remains with over half of sustainability leaders surveyed saying that investors (58%) and customers (51%) are accelerators, motivating businesses to deliver on their sustainability programs. Furthermore, those that remain committed to sustainability targets are seeing benefits from their actions with eight in 10 “pacesetters” capturing higher than expected financial value, compared to just 45% of “observers”.

Matt Bell, EY Global Climate Change and Sustainability Services Leader, says: “CSOs are facing an inflection point. Most have made climate commitments and are now under pressure to meet them. So, it’s unsurprising that focus has moved from public declarations to implementation and delivery. We are entering a period where deep decarbonization gains are linked to large scale, cross sector, investment, data and transformation. It requires organizations to support the CSO or sustainability team to deliver the action they can take now for the long term. It’s vital that progress is not compromised as we wait for the right time, data or price.”

Embracing the role of the ‘transformational CSO’

The study also highlights the need for CSOs to become transformation agents. The research shows that organizations experience more success with their sustainability programs when CSOs are empowered to be transformational agents with a clear mandate, significant influence in the organization, involvement in corporate strategy, and authority to hold others accountable for sustainability performance.

‘Transformational CSOs’, who currently make up just one in five of those surveyed, are realizing higher than average emissions reductions (21.2%) and taking more action on their climate change commitments action on an average of 27 out of 32 identified initiatives. They are also able achieve greater collaboration across the C-suite, which continues to be an area for improvement noted by respondents.  

Amy Brachio, EY Global Vice Chair of Sustainability, said: “Sustainability leaders have to play an increasingly strategic role in navigating both internal and external challenges of moving from climate ambition to climate action. Therefore, it is essential that they are not only empowered to drive sustainability initiatives but also have the operational mandate to integrate their plans into a wider business strategy. This entails that CEOs not only appoint CSOs with a deep understanding of their business models but also strongly endorse collaboration between the CSO and other members of the C-Suite.”

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Notes to editors

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About the EY 2023 Sustainability Value Study

The second annual EY 2023 Sustainable Value Study draws on insights from a global survey of 520 Chief Sustainability Officers (CSOs) or those with equivalent responsibilities in their organization. Organizations with these sustainability roles have reached at least a basic level of maturity about addressing climate change. These results are not representative of all businesses but are focused on those who have begun their climate journey. In addition, we conducted in-depth interviews with sustainability leaders at seven companies across six industries.