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Global CEOs Remain Committed to Sustainability, But Report Frustrated Ambition and Call for Policies to Align Market Incentives with Sustainability

October 14, 2013

 

Largest global CEO study on sustainability, by UN Global Compact and Accenture, identifies approaches that combine high performance in market leadership and sustainability

 

New York, 20 September 2013 – More than two thirds of chief executives - 67 percent - believe that business is not doing enough to address global sustainability challenges, according to a survey by the United Nations Global Compact and Accenture (NYSE: ACN). Amid evidence that CEOs are strongly committed to embedding sustainability throughout their organizations, the vast majority now call for action to incentivize and reward sustainability leaders and unlock the full potential of the private sector. 

 

Business leaders’ views on the private sector’s progress in addressing global sustainability challenges are detailed in the survey of 1,000 CEOs. It is the latest triennial global poll by the UN Global Compact and Accenture, and the largest such study of top executives ever conducted on sustainability. Published in The UN Global Compact-Accenture CEO Study on Sustainability 2013: Architects of a Better World, the study also includes in depth interviews with 75 CEOs and an analysis of those companies that successfully combine sustainability leadership with market leading business performance.

 

As the UN Global Compact continues to see rapid growth, with almost 8,000 corporate participants, the study demonstrates broadening awareness on the part of global business of the opportunities presented by sustainability. Fully 78 percent of surveyed CEOs see sustainability as a route to growth and innovation, and 79 percent believe that it will lead to competitive advantage in their industry. However, CEOs see the economic climate and a range of competing priorities creating obstacles to embedding sustainability at scale within their companies.

 

This year, 93 percent of respondents say that environmental, social and governance issues are important to the future of their business, the same proportion as the previous study in 2010. But the proportion describing sustainability as very important has fallen from 54 percent to 45 percent, including only 34 percent of CEOs in Europe. While 84 percent believe that business should lead the way in addressing sustainability challenges, they point to a number of barriers:
 

  • A lack of financial resources is the leading barrier to advancing sustainability, cited by 51 percent of respondents; 40 percent say that economic conditions have made it difficult to embed sustainability into core business.
     
  • The failure to make a link between sustainability and business value is the fastest rising barrier. In 2007, 18 percent said this deterred them from taking further action, rising to 30 percent in 2010.  This year, 37 percent of responding CEOs cited this factor, and just 38 percent believe they can accurately quantify the business value of sustainability. 
     
  • Only 15 percent of responding CEOs think business has made good progress over the last three years in making sustainability a must-have factor for consumers, even though 82 percent think this is critical to harnessing sustainability as a transformative force in the economy. Almost half (46 percent) believe consumers will always consider sustainability as secondary to price, quality and availability. 
     
  • In a sign of investor ambivalence, although 52 percent of respondents see investor interest as an incentive for them to advance sustainability practices, only 12 percent of respondents see investor pressure as a leading motivator. Nevertheless, only a small minority of CEOs (15 percent) blame the short-termism of financial markets as a barrier, and 69 percent believe that investor interest will be increasingly important in guiding their approach.

 

“As the CEO study reflects, the challenge at hand is to unlock the full potential of corporate sustainability to transform markets and societies around the world,” said Georg Kell, Executive Director of the UN Global Compact. “With thousands of companies, from market leaders to small enterprises, committed to responsible business practices, we can see that there is enormous momentum. Now, we need policymakers, investors and consumers to send the right signals to spur the next level of corporate sustainability action, innovation and collaboration.”

 

 

A call for partnerships with governments and market intervention
 

CEOs are demanding greater collaboration between business, governments and policymakers, according to the survey. Forty two percent of respondents now list governments among their top three stakeholders in sustainability, a rise from 32 percent in 2007. Eighty three percent of respondents think more efforts by governments to provide the enabling environment will be integral to the private sector’s ability to advance sustainability. Specifically, 85 percent demand clearer policy and market signals to support green growth.

 

When asked which policy tools should be prioritized, 55 percent point to regulation and standards and 43 percent call for governments to adjust subsidies and incentives. A further 31 percent seek intervention through taxation. Softer measures, such information and voluntary approaches, are supported by only 21 percent of CEOs.

 

“CEOs’ initial optimism has given way to the belief that the constraints of market structures and incentives prevent them from embedding sustainability at the heart of their business,” said Sander van ‘t Noordende, Group CEO, Accenture Management Consulting. “Many would now welcome government action to reshape market rules.  But before taking this step, business leaders should recognize that even in today’s imperfect markets, high performing companies do manage to combine commercial and sustainable success. These companies are harnessing sustainability as an opportunity for growth, innovation and differentiation, and demonstrate that sustainable business is good business.” 

 

 

High Performers in Sustainability  

 

Using Accenture’s methodology to assess high-performing companies, the report identifies a number of approaches most likely to be taken by what the study categorizes as “Transformational Leaders”, those assessed as sustainability leaders that also outperform their industry peers on traditional business metrics.  These companies more readily accept that the world is not on track to meet the needs of a growing population and that business is not doing enough. They are also more committed to engaging consumers, local communities, policy makers, investors and other stakeholders.  The analysis reveals that these leaders set an example for other businesses by being more likely to:  
 

  • See sustainability as an opportunity for growth and innovation, according to 81 percent of Transformational Leaders, by accessing new markets, developing new products and services, and differentiating their offerings through superior social and environmental performance.
     
  • Go beyond measuring their emissions and mitigation efforts to fully quantify and track the positive value of sustainability to their company and their impact on the communities in which they operate; 81 percent of Transformational Leaders practice integrated reporting of financial and sustainable metrics.  
     
  • Invest in innovation and deploy new technologies to advance sustainability. These include more sustainable and efficient uses of energy, data analytics to better manage resource consumption, machine-to-machine technologies and closed loop business models; 95 percent of Transformational Leaders report that they will invest in and deploy new technologies on sustainability in the next five years. 

 

“CEOs are clearly disappointed that markets have not aligned with sustainability in the way they had hoped three years ago and would like to see more action from governments to create an enabling environment. But the good news is that they have not lost faith in the role of business to drive sustainability,” Peter Lacy, the study lead from 2007 to 2013, and managing director, Accenture Sustainability and Strategy Services, Asia Pacific. “To move from incremental to large scale transformation, businesses must accept that instead of  persuading consumers about sustainability they must give them sustainable products and services they want at prices they can afford. And instead of showing investors the savings made from sustainability, the will have to demonstrate the positive business value it can generate.”

 

Learn more at: www.accenture.com/ungcstudy

Download the report

 

 

Source: UN Global Compact website