The recently-published 12th UN Global Compact-Accenture CEO Study (the “Study”), led by United Nations Global Compact, surveyed more than 2,600 CEOs across 128 countries and 18 industries, to produce a picture of current thinking around sustainable leadership, what businesses are calling for, and what business leaders can do to integrate sustainability into their businesses to build resilience.
The Study finds that other global challenges are slowing progress on sustainability even as it remains high on CEOs’ agendas, and offers some potential solutions. These include embedding sustainability into core strategy, adopting a nature-positive approach, and including ESG in investment decisions. It concludes that companies that are able to embed sustainability considerations across their business will likely be more resilient and more competitive.
Checking the pulse of business leaders – what is the current thinking around sustainability?
The overarching message from CEOs is that, whilst an increasing number of business leaders see sustainability as a top priority, progress on the UN Sustainable Development Goals (“SDGs”) is faltering: 87% of CEOs surveyed feel that current levels of geopolitical instability limit the world’s ability to achieve the SDGs. This is particularly concerning given that the deadline for achieving the SDGs is 2030.
Geopolitical instability is also impacting businesses’ own initiatives: 43% of CEOs agree that geopolitical instability has set back their sustainability efforts, with companies in the developing world and SMEs facing particularly tough headwinds.
Business leaders are grappling with “a slate of global challenges, many of which span beyond typical business boundaries.” 93% of CEOs reported that they are dealing with 10 or more global challenges to their business, with the top five challenges being (in order): inflation and price volatility; talent scarcity; threats to public health; climate change; and trade regulation.
At the same time, there’s an increased focus on sustainability, with views clearly shifting from 2013: 98% of CEOs believe it is their role to make their businesses more sustainable, compared to 83% of CEOs saying that they felt accountable for the sustainability performance of their company in 2013.
The ‘S’ in ESG is also rising up the agenda: 91% of CEOs believe that their role is to protect local communities in the regions they operate in and 70% of CEOs feel it is their role to speak out publicly on potentially divisive social issues.
These beliefs appear to be translating into tangible actions. Businesses are continuing to invest in sustainability-related initiatives, with 63% of CEOs reporting that they are launching new products and service offerings for sustainability.
What can business leaders do to integrate sustainability into their businesses?
The Study emphasises that businesses can work towards achieving the SDGs whilst also “build[ing] resilience to the complex slate of challenges the private sector must navigate”. CEOs must embed protections across their business – in their strategy, workforce, supply chains and greater ecosystems. Some key points include:
- Embed: CEOs are encouraged to embed sustainability into the core strategy of a company, by adopting a sustainable business model “to transform […] businesses for long-term growth.” This could include adopting a circular economy business model, which would bring with it the benefit of efficiency gains and increased resilience to supply chain shocks.
- Invest: CEOs should include ESG impacts in their investment decisions, to ensure that they are made with long-term value in mind. The Study states that some CEOs are integrating ESG criteria into their due diligence processes when contemplating M&A transactions, in order to mitigate risk and to build a “compelling case for investment decisions.”
- Nature: CEOs are advised to adopt a “nature-positive business strategy”, assisted by the standard set by the Taskforce on Nature-related Financial Disclosures. Biodiversity remains low on the CEO agenda, however. Protecting and restoring biodiversity was prioritised by 18% of CEOs, ranking it as the lowest of all sustainability initiatives.
- People: CEOs must invest in the workplace, to ensure that workforces are aware of sustainability, and equipped with the necessary skills needed for a green transition.
What support would businesses like to see from governments?
CEOs have stated that they cannot do this alone. 51% believe they could play a critical role to achieve the SDGs with increased commitment and action from the state. According to the Study, “[t]he voice of private sector CEOs is clear – government must establish a transparent, equitable and actionable playing field in which businesses can take the reins and innovate.”
CEOs are calling on policymakers to align nationally determined contributions at 1.5C, cooperate on carbon pricing, realise a biodiversity framework, standardise ESG reporting frameworks, enable the circular economy, support policy for a just transition and provide education and financing for SMEs.
The task ahead
It’s no small task for businesses. What is clear, however, is that the private sector has a significant role to play in achieving the SDGs and making meaningful progress towards a green transition more broadly. Businesses can derive benefits from taking action too. The Study emphasises that integrating sustainability into businesses is much more than a ‘nice-to-have’, but a way to risk-proof business models and, in some cases, to gain an advantage over competitors: “CEOs must embrace sustainability to chart the course for a more resilient, competitive future or risk the consequences of inaction.”