Organizations today face increasing pressure from all angles: stakeholder and client demand to address climate change, new sustainability-related government legislations, and energy and resource volatility. The world’s largest organizations play a vital role in decarbonization and the sustainable energy transition, but how committed are they to investing in this change?
To answer this question, Schneider Electric commissioned a study that gathered insights from 541 C-level decision makers at the world’s leading organizations. In this research, we asked business executives questions like:
- How committed is your organization to sustainability?
- Where is your organization at in its sustainability journey?
- What sustainability-related initiatives is your organization currently pursuing?
- What sustainability-related initiatives does your organization plan to pursue in the medium term?
- What key challenges does your organization face
Organizations are increasingly committed to sustainability and ready to invest capital on the road to net-zero. However, not all organizations are prioritizing the most effective initiatives or navigating the fastest path forward.
Our study’s results helped to identify three categories that organizations fall into on the sustainability spectrum: Leaders, Followers, and Laggards. Let’s explore some of the most important findings from the C-Level Corporate Sustainability Pulse Check.
Sustainability Is a Moral Imperative
There are myriad reasons why organizations might choose to commit their time, money, and resources to sustainability initiatives. But what really makes them take the plunge? According to our research: Morality and climate awareness.
When asked to rank the top three reasons for their commitment in order of priority, ‘moral reasons’ topped the list and was the most common number one choice. Moral reasons are especially motivating for Sustainability Leaders, with 28% citing it as the most important compared with only 8% for Sustainability Laggards. Surprisingly, ‘opportunity for savings’ was the lowest ranked reason for pursuing sustainability initiatives, suggesting that organizations see sustainability as an investment in the future rather than a short-term gain, or that they do not currently associate sustainability initiatives with bottom-line benefits. Which leads to the next key finding.
Organizations Can and Will Commit Capital to Sustainability
Sustainability initiatives require financial backing. This willingness to leverage capital to make changes is where the Sustainability Leaders distinguish themselves from Followers and Laggards.
Overall, many organizations recognize the importance of decarbonization initiatives, but decarbonization is complex. We discovered that, in general, Laggards still face budget and financing barriers and are concerned about aligning with their stakeholders. Comparatively, Leaders have moved on to address challenges related to meeting government regulations and tackling issues such as reducing carbon, recycling, and natural resources.
Sustainability Leaders plan to invest more than twice as much as Laggards (2.3% vs 1%), and 15% more than Followers.
Key Initiatives to Drive Changes Are Often Overlooked
One reason that many organizations find starting their sustainability journey overwhelming is the sheer number of sustainability and decarbonization initiatives that they can choose to pursue. What issues are most important to address? What actions are most highly regarded with investors, customers, employees, NGOs, and the public?
Some of the top initiatives business leaders reported their companies are pursuing include:
- Procurement of renewable energy
- Improving internal and external sustainability messaging
- Reducing or avoiding CO2 emissions
- Setting sustainability targets
However, there was discrepancy between what initiatives survey respondents rated as most important versus most popular. For example, even though improving sustainability messaging was the second most reported initiative underway, it was only ranked as the fifth most important. This may indicate that although businesses leaders recognize which issues are most critical, they may be opting to focus on low-hanging fruit.
Challenges Change with Time and Investment
Decision-makers face many challenges when it comes to implementing sustainability initiatives. Some of the most reported concerns are stakeholder alignment, budget, technology, skills, and regulations. The weight of these challenges tended to shift as organizations progress in their sustainability maturity.
Laggards rated ‘budget and financing concerns’ as the key hurdle they face (22%), while Leaders considered five other areas more challenging than budget. This indicates that the challenge to fund sustainability initiatives decreases as businesses become more advanced and sustainability becomes more embedded as a core value.
The challenge to fund sustainability initiatives decreases as businesses become more advanced and sustainability becomes more embedded as a core value.
Another point of divergence between Leaders’ and Laggards’ perceived challenges was the impact of government regulations. While one in five Leaders named regulatory compliance as their greatest concern, only 8% of Laggards agreed. This indicates that Laggards may underestimate the impending impact government regulations could have on their organizations.
Expertise Is Essential for Reaching Sustainability Ambitions
Managing, designing, and delivering sustainability programs and initiatives is no easy task. Half of decision makers (51%) use both internal and third-party resources and talent to manage their programs, preferring consistent partners who can deliver end-to-end results across strategy, implementation, and digitization.
Sustainability Leaders (58%) are more likely to use both internal and external resources in the pursuit of sustainability goals, as are organizations with more than $10 billion in revenues (56%).
Sustainability Data Management Requires Dedicated Software
After committing to sustainability initiatives, organizations must then decide how they will manage their sustainability data and metrics. Almost half (43%) of respondents use dedicated third-party sustainability software. Of those who chose to use a third-party data management provider, 49% ranked cybersecurity standards as a top consideration when choosing a technology partner, followed by 45% ranking implementation capabilities most highly.
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Benefits of Electrification and Automation Lost on Laggards
One of the key takeaways of this study is that, unlike Laggards, 100% of Sustainability Leaders regard upgrading electrical infrastructure and enhanced automation as a part of their sustainability plan.
Surprisingly, only 31% of organizations currently push electrification initiatives, with a stark difference between Leaders (44%) and Laggards (19%). There is a massive gap in how Laggards rank and understand the importance of electrification and automation, as only 5% rank these areas as part of their sustainability initiatives.