Companies that sell everything from insurance to toothpaste to liquor have been acting to curb climate change and generally to be better global citizens.
Executives concede that private industry, which is 75% of global GDP, will have to be leaders on this front as governments finger-point and as investors and consumers demand more from the companies they engage with.
That was 2015. This is now.
Despite pockets of progress and innovation since the goals among executives were agreed to in 2015, socioeconomic, geopolitical and technological uncertainties over the past four years have distracted CEOs’ sustainability efforts, says the updated United Nations Global Compact-Accenture Strategy 2019 CEO study out Tuesday.
A slowing global economy has been a reality check for some CEOs — U.S.-led trade wars and Brexit uncertainty are just a couple of the key issues slowing global unification on climate, health and more. Global economic growth is expected to weaken to 2.6% in 2019, then inch up to 2.7% in 2020, according to the World Bank.
The Global Compact showed that some victories, including cutting the infant-mortality rate, can be claimed, but that the societal work ahead requires even greater contributions from participants and wider buy-in from more companies. Seventy-one percent of CEOs believe that — with increased commitment and action — business can play a critical role in contributing to the goals and hitting the 2030 target set a few years ago.
The long-run vision is not lost, some CEOs stress. “I believe businesses that are only targeting profits will die. Only those targeting all stakeholders will remain profitable in the future,” said Alex Ricard, chairman and CEO of Absolut and Jameson maker Pernod Ricard RI, +0.82% .
Called “The Decade to Deliver: A Call to Business Action,” and issued as the UN meets in New York, the report finds that less than half (48%) of participating CEOs are integrating sustainability into their business operations.
The study draws on insights from more than 1,000 CEOs around the globe and combines information with the UN Global Compact Progress Report, which surveyed nearly 1,600 companies from over 100 countries. Its authors claim it forms the most comprehensive research to date on business contribution to the 2030 Agenda for Sustainable Development.
Peter Lacy, senior managing director at Accenture Strategy, said that CEOs increasingly realize that sustainability doesn’t have to be a profit-killer. In fact, it’s “integral to the competitive agility” of every organization that wants to attract and retrain the trust of customers.
“There is no difference between our business strategy and our sustainability strategy… they are totally integrated,” said Alan Jope, CEO at consumer products giant Unilever UN, +0.76% .
Climate issues, a feature at this UN session, are among the topics addressed in the updated CEO compact.
Last year’s study from the Intergovernmental Panel on Climate Change (IPCC) set 2030 as the target to cut emissions in half to avoid some of the worst outcomes. There’s hope among the group that the cause remains a worthy one.
“The scale of the challenge is unprecedented and requires all stakeholders, including governments, policymakers, business leaders, investors, shareholders, civil society and academia, to work together to accelerate change,” said Lise Kingo, CEO and executive director of the UN Global Compact. “We’re confident change is coming and are particularly pleased with the progress from the 87 companies that have announced this week that they are leading the way towards a 1.5°C future.”
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But turning awareness into action may not be happening fast enough for climate clock-watchers.
While 59% of the CEOs say they’re deploying low-carbon and renewable energy, only 44% see a net-zero future for their company in the next decade. And just 41% are decarbonizing their supply chains. Just one-third of the CEOs say they have or plan to set a science-based carbon target. Notably, 63% see technology as a critical accelerator of the socio-economic impact of their companies.
Over a quarter (28%) cite “absence of market pull” as a top barrier to sustainable business, and over half (55%) say they face a key trade-off in the pressure to operate under extreme cost-consciousness while seeking to invest in longer-term strategic objectives.
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As Andrew Winston, writing in the Harvard Business Review pointed out, the survey showed just how much investors are driving CEO planning, regardless of the shift at the Business Round Table.
Over the summer, the heads of nearly 200 U.S. companies committed to a move away from a main purpose of maximizing shareholder value, marking a break with a long-held conviction. Statements of purpose will instead include all stakeholders, including employees, suppliers and broader society.
“No matter what the BRT statement says, most companies won’t act aggressively unless they believe investors value their sustainability efforts,” Winston wrote. He pointed to a quote by CEO of French energy giant EDF Energy EDF, +0.47% Simone Rossi: “There is a great disparity between the public statements put out by banks and investors and their apathy towards sustainability behind closed doors.”
Here are additional quotes from participating executives interviewed in the report:
Jean-Sebastien Jacques, CEO of Rio Tinto: “We are not a development agency. It’s only with profitability that we can contribute to sustainable development.”
Peter Oswald, CEO of Mondi Group: “Mother Earth doesn’t look at individual countries or regions, it’s the overall picture and the current system simply doesn’t work.”
Rachel Watson, CEO of PHPL: “I think businesses can create a demand for renewable energy. Creating that market pressure would be the most obvious thing for businesses to do.”
Chuck Robbins, chairman and CEO of Cisco: “Companies may not always be able to draw a straight line between the business and what’s good for society, but healthy communities are what help businesses and people thrive. We must all take action and use the tools at our disposal.”
Lars Fruergaard Jørgensen, president and CEO, Novo Nordisk A/S: “Companies that have global footprints can drive the climate agenda so it becomes a global movement in countries that may not have the same will or capacity to make the investments.”
João Paulo Ferreira, CEO of Natura: “...[W]e are going to do what is right and if it costs more, we tell that to consumers and if they are willing to pay, that is great, otherwise we are going to reduce our cost margin somehow and find efficiencies elsewhere.”
Karl-Johan Persson, CEO of H&M Group: “We see a rising interest in sustainability amongst our customers, while at the same time the demand for speed and convenience further increases. Our job is to make the most sustainable choice also the most convenient.”