Share Of Executives Recognising Business Case For Sustainability Has Tripled: Capgemini

A growing number of leaders also acknowledged the benefits of incorporating sustainable business practices and processes.

<div class="paragraphs"><p>(Source: Freepik)</p></div>
(Source: Freepik)

Three times more executives across industries are now clear on the business case for sustainability compared to last year, according to a report from Capgemini Research Institute. A growing number of leaders also acknowledged the benefits of incorporating sustainable business practices and processes. However, limited concrete impact can be achieved if investment levels remain unchanged.

The report was based on a survey of executives from 718 organisations across 13 countries in North America, Europe and Asia-Pacific, covering 11 industries.

Climate Disasters, Regulatory Pressure Driving Sustainability Business Case

The report found that 63% of executives agreed that the business case for sustainability is clear. This percentage has tripled from 2022, when only 21% of executives agreed. The percentage of executives that claimed the cost of sustainability initiatives outweighs the benefits has dropped from 53% to 24%. Those that felt sustainability initiatives are a financial burden have declined from 53% to 22%.

The increase in extreme weather events and their rising associated cost is playing a role in this shift, the report noted. Additionally, regulatory pressure and expected return on investment are also key drivers: 74% of executives hoped to increase future revenue (up from 52% in 2022), and 64% cited compliance with current regulation (up from 51% in 2022).

Businesses Focused On Key Foundations, But Investment Lagging

Of the executives surveyed, 61% said their company has a defined priority list of sustainability initiatives to implement in the next three years (up from 49%), and 57% shared that their organisation is in the process of redesigning its business/operating model to be more sustainable (up from 37%).

However, limited impact is to be expected without increased investment for mitigatory action against climate change. In 2023, the average annual investment in environmental sustainability initiatives and practices as a share of annual revenue of companies across industries only increased by 0.01%.

The share of executives that said their organisation has the ability to measure and collect data on scope 1 and 2 emissions has remained unchanged, year on year. For scope 3 emissions, the share has even declined, from 60% in 2022 to 51% in 2023.

Social Sustainability Moves Up Corporate Agenda

Over half of executives (56%) said their organisation is increasingly focused on the social dimension of environmental, social and corporate governance, with employees being the primary beneficiaries. However, research revealed that organisations could do more to support workers in the supply chain, with 64% of executives saying their organisation considers the ESG ratings and environmental pledges taken by suppliers during supplier selection but only 38% saying they only work with suppliers who pay a living wage.

Greenwashing Perception Gap

The report found a perception gap between executives and consumers over greenwashing. Only 17% of executives said they believe consumers are concerned by the risk of greenwashing, while 33% of consumers globally believed organisations and brands are greenwashing their sustainability initiatives.

Consumers in India (45%) and Canada (43%) were the most suspicious of sustainability claims. Generation Z was far more suspicious of such claims (50%) than boomers (18%). Almost half (49%) of consumers never, rarely or only sometimes trust an environmental claim about a purchase they are considering, with scepticism rising to 65% among Gen Z consumers.

Generative AI Focus Within Sustainability Strategies

Organisations are focusing on digital technology, particularly generative artificial intelligence, to realise sustainability goals, with 59% of executives believing it will play a key role in their organisation’s sustainability transformation efforts. Additionally, 57% said their organisation has started to take steps to mitigate the environmental impact of using generative AI models.