While most companies around the world are busily engaged in sustainability initiatives, on average they’re not all that confident of attaining their net-zero targets.
In a survey of 2,000 global finance leaders by EY, fewer than half (47%) of the participants said it’s “very likely” their organization will achieve its major sustainability priorities and meet stated targets, such as achieving net zero on time.
The pace of transition is lagging behind what’s needed to achieve net zero by 2050 in accordance with the 2015 Paris Agreement, EY wrote in its survey report. And many companies have adopted accelerated targets, such as net zero 2040.
It’s fairly easy to put in place an ambitious sustainability target, noted Matt Bell, global climate change and sustainability services leader for EY. However, he suggested, that once companies “start drilling into the data and see how much needs to be done … their conservative tendency perhaps starts to kick in, with a healthy skepticism about the organization’s ability to hit those commitments.”
Sustainability is a leading concern among today’s investors, but according to EY’s data, they’re actually a little more confident about companies’ trajectory than are the companies themselves.
EY additionally surveyed 815 institutional investors, 53% of which said they believed companies would be very likely to hit their sustainability targets.
Among companies, the level of confidence that they will attain their targets varied markedly by industry sector, from retail, with 67% of finance leaders saying it’s very likely, to consumer products, where just 25% said so.
EY suggested that some companies may be focused on short-term profits at the expense of long-term commitments. Almost a third (29%) of group CFOs who participated in the survey said capital investment around sustainability had decreased over the few months before this year’s second quarter when the survey was taken.
For their part, 80% of investors agreed with the statement, “Executive teams are too quick to take steps designed to drive short-term profit or meet quarterly earnings guidance.”
As the survey report noted, the challenges involved in measuring the value of sustainability initiatives are significant. A key, EY advised, is “creating a balanced portfolio,” such that initiatives that create financial value can subsidize those that have a positive planetary impact but uncertain financial return.
Of course, regardless of what companies achieve on the sustainability front, public perceptions of their achievements are crucial. A majority of the surveyed finance leaders agreed that “to a large extent,” sustainability reporting in their industry risks being perceived as including elements of greenwashing.
Finance leaders in the telecom and retail industries were the most likely to acknowledge that risk, with 67% characterizing it as a “large” risk.
“These doubts may reflect the relative immaturity of sustainability reporting compared to the sophisticated methods used in financial reporting,” EY wrote. “Companies have drawn on multiple voluntary sustainability reporting frameworks, and metrics are still evolving.”
