It is no secret that consumers are concerned about sustainability. With disastrous weather events like Hurricane Helene, which formed amid unusually high Atlantic and Gulf of Mexico temperatures, people are being forced to treat sustainability as an environmental priority rather than an abstract idea.
But do CEOs recognize that need? The answer is a tepid yes.
More than half of CEOs polled across multiple surveys rank sustainability alongside AI and inflation as a top concern. That still leaves a significant group who do not see it that way. The encouraging news is that overall CEO concern is rising.
In a survey of 1,200 CEOs from large companies across 21 countries, along with 300 institutional investors, EY found that 54% of CEOs said sustainability is a higher priority for them and their boards than it was 12 months earlier, according to reporting by ESG Today. Meanwhile, 23% said sustainability had been deprioritized, mostly because of challenging economic or financial conditions.
The regional picture varied. Respondents in the Americas were the most likely to report rising priority at 62%, and the least likely to report deprioritization at 16%. Europe showed 51% increasing and 27% decreasing, while Asia-Pacific showed 49% increasing and 25% decreasing.
Notably, CEO views diverged from those of investors. Only 28% of institutional investors said sustainability was a higher priority than a year earlier, while 35% said it had become a lower one. In the same vein, 73% of CEOs agreed that activist investors care more about near-term financial results than long-term sustainability metrics.
Andrea Guerzoni, EY Global Vice Chair for Strategy and Transactions, cautioned that prioritizing short-term returns over sustainability targets may be shortsighted. While many CEOs remain committed to their decarbonization goals, he called it disappointing that nearly one in four are moving sustainability down the agenda. Both CEOs at 75% and investors at 70% agreed that technology and AI hold answers to many key sustainability challenges.
The pressure on CEOs comes from several directions at once:
Other research shows steady upward pressure. A Gartner survey found CEO concern for sustainability rose 292% over the prior year. In a survey of 2,600 CEOs by the UN Global Compact and Accenture, 98% agreed sustainability is core to their role.
The IBM Institute for Business Value found that 51% of CEOs call sustainability a top business challenge, up from 32% in 2021, ranking it ahead of regulation, cyber risk, technology infrastructure, and supply chain disruption. The same study found 80% of CEOs expect sustainability investments to deliver stronger business results over the next five years. A World Economic Forum study found 70% of CEOs believe sustainability will be a major driver of economic growth in that same window.
Consumers are clearly driving the demand. The harder question is whether they know what they are looking for. According to Bain & Company, consumers struggle to figure out how to live sustainably and look to brands, retailers, and government for help. That creates opportunity for companies that can guide them, but it also raises the stakes in a tough economy.
Bain’s research, drawing on nearly 19,000 consumers, found that roughly 60% are more concerned about climate change than they were two years earlier, often because of personal experience with extreme weather. Among business-to-business buyers, 36% said they would leave a supplier that failed to meet their sustainability expectations.
The economic stakes are concrete. Bain notes that a 2-degree Celsius temperature increase would carry devastating consequences for people, nature, and the economy alike. The International Monetary Fund estimates the cost of capital could rise more than 1%, a shift that alone could erase $6 trillion from the value of the S&P 500.
At least half of CEOs now appear to be in step with consumer demand on sustainability. The open question is whether matching concern translates into the kind of action needed to protect not only the world economy, but the world itself.
Concern is rising. Whether it becomes commitment is the story still being written.
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Reverences:
Mark Segal, “Over Half of CEOs Say Sustainability a Higher Priority Now Than 12 Months Ago: EY Survey,” ESG Today, May 7, 2024.
Beth Dean, “Why Are CEOs Worried About Sustainability?” Nextep, Nov. 7, 2023.
John Blasberg, Jean-Charles van den Branden, Harry Morrison, David Zehner & Leah Johns, “The Sustainability Puzzle: What Do Consumers Really Want?” Bain & Company, Sept. 9, 2024.
Additional data cited via Nextep: Gartner; UN Global Compact and Accenture; IBM Institute for Business Value; World Economic Forum.