By Yusuf Khan | Sept. 9, 2024 12:01 am ET| WSJ Pro
AI, growth, inflation and geopolitics were all more important to CEOs in a recent survey
Wind turbines in northern England. Photo: oli scarff/Agence France-Presse/Getty Images
Sustainability and other environmental issues are dropping down the list of priorities for chief executives, even as consumer climate concerns are on the rise, according to a new report.
Artificial intelligence, growth, inflation and geopolitical uncertainty are now the top issues for CEOs as they plan their strategies, Bain & Co. said in a report out Monday. At the same time, 60% of consumers are more concerned about climate change than they were two years ago, mainly because of their own personal experiences of extreme weather, the report found.
“When you look at the importance of [environmental, social and corporate-governance efforts], you can clearly see a huge peak in 2021 to 2022 where there was also a lot of action off the back of” the Glasgow COP26 climate conference in 2021, said Torsten Lichtenau, Bain’s global carbon transition practice lead. “Now it’s dropped back to 2019 levels.”
Lichtenau said that many companies set hugely ambitious goals when it came to climate and ESG in past years, and were now becoming more realistic when setting targets, noting how hard and expensive it is to actually decarbonize. “If you look at the journey, you go through the part of where you have huge ambitions setting goals and then you have a drop down, and then back to a more realistic way to drive it,” he said.
Many companies have been less vocal about ESG and some have even given different names to such efforts. BlackRock, for example, is calling its tactic for investing in clean energy transition investing. A recent analysis by WSJ Pro found that company boards are mentioning sustainability in their financial reports almost as much as ever, but are talking about it less in earnings calls and marketing materials.
A report from Barclays in August showed that clients have withdrawn a net $45 billion from ESG equity funds since the start of the year, with this year being the first that flows have trended negative.
However, Bain said that customers and business-to-business companies are demanding more when it comes to sustainability, with 36% of the latter saying they would switch suppliers if they didn’t meet their sustainability expectations.
The report also highlighted that just over a third of businesses were missing their Scope 1 and 2 targets—emissions that relate directly to their own businesses and activities—while more than half were missing their Scope 3 targets, which relate to supply-chain emissions.
Lichtenau said investors would be unlikely to penalize a company that missed its targets if it was still making attempts to decarbonize and setting more realistic targets.
“People are getting more realistic, but the pressure will increase as we approach 2030 where many companies have set climate goals,” he said.
The Bain report also found that Generation Z consumers, usually defined as those born between 1997 and 2012, were more interested in sustainability and willing to pay premiums for goods and services that met with their own beliefs.
Write to Yusuf Khan at yusuf.khan@wsj.com
Copyright ©2024 Dow Jones & Company, Inc. All Rights Reserved.
Appeared in the September 10, 2024, print edition as 'CEOs Focus Less on Sustainability'.
Comments