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Friday, September 20, 2013

CEO survey is gloomy reading for the corporate sustainability movement 09-20

CEO survey is gloomy reading for the corporate sustainability movement

The world's largest CEO sustainability study shows most companies are not integrating social, environmental and governance issues into their core strategies

Rain clouds over Calcutta
World's largest CEO sustainability study makes bleak reading with evidence that business transformation has ground to a halt. Photograph: Piyal Adhikary/EPA
The results of the world's largest CEO sustainability study   make bleak reading with strong evidence that the journey towards business transformation has ground to a halt.
The survey, released to coincide with the United Nations Global Compact (UNGC) leaders summit in New York, shows that despite the recognition the world is in grave danger, business leaders do not believe the conditions are in place for them to meet the challenge.
CEOs admit they are still struggling to make the business case for long-term investments, while key influencers such as consumers, governments and investors are failing to provide the incentives. For example, just one third of those running public companies believe their share price currently includes value directly attributable to sustainability initiatives and performance.

Lack of progress on challenges

The study, of more than 1,000 top executives from 27 industries across 103 countries, comes hard on the heels of depressing results from two other recent surveys, one from the UNGC and the other from the global NGO CDP, which also provide concrete evidence of the lack of corporate progress.
What is perhaps most worrying about the study is that it shows the majority of the world's most powerful corporate leaders feel powerless to respond to the multiple challenges of climate change, resource scarcity, poverty and environmental degradation.
They clearly recognise the enormity of the risks with only a third believing the global economy is on track to meet the demands of a growing population within planetary boundaries. Two-thirds also recognise business is not doing enough to meet these challenges.
But the optimism shown when the last survey was carried out three years ago in the business sector's ability to lead from the front has collapsed like a soufflé taken out of the oven too early.

"Pilot paralysis"

As the study concludes: "CEOs see business caught in a cycle of "pilot paralysis" — individual, small-scale projects, programmes and business units with an incremental impact on sustainability metrics — and while they see a role for business in promoting sustainable development, their responsibilities to the more traditional fundamentals of business success, and to the expectations of markets and stakeholders, are preventing greater scale, speed and impact."
In fact, only 45% of CEOs believe that sustainability will be "very important" to the future success of their business, compared with 54% in the last survey carried out in 2010.
"This drop is striking in the context of intensifying global challenges," says the report. "A decline in the perceived importance of sustainability among global business leaders is not encouraging for those working to align business with sustainable development."

Barriers to change

The reason for the drop is because short-term pressures caused by the economic downturn mean sustainability is being put on the back burner to await another day. Growth and employment were the most important issues identified by CEOs, while issues more closely tied to social and environmental development, such as climate change, poverty, water and health, slipped down the agenda.
Perhaps the most shocking statistic is that CEOs are finding it progressively harder to justify the business case for sustainability. In fact, this was identified by the respondents as the fastest-rising barrier to change. In 2007, just 18% said they were unable to trace a link between sustainability and business value. In 2010, this rose to 30%, and this year it has gone up again to 37%.
Could this have something to do with the fact that discussions with CEOs showed that many business leaders starting to act on sustainability still do not have a clue what the term actually represents, confusing it with philanthropy and charity?
The report says: "The more adept companies become at measuring and tracking their own sustainability performance, the more their frustration grows at an apparent inability to tie performance improvements and industry leadership to the fundamentals of business value beyond incremental gains."
Peter Lacy, managing director at Accenture's strategy and sustainability in Asia Pacific, who led the report, sums up the quandary CEOs are in: "Sustainability has become firmly established on the leadership agenda of almost every leading business," he says.
"But there is also reason for caution. Our interviews this year suggest that business may collectively have reached a plateau in the advancement of sustainability. Without radical, structural change to markets and systems, CEOs believe, business may be unable to lead the way toward the peak of a sustainable economy."

A place for policy

The report clearly shows that for CEOs to act decisively, they believe they need government at global, national and local levels to step in and force the pace of change.
The study shows that 85% of CEOs demand clearer policy and market signals to support green growth while only a slightly smaller percentage emphasise the need for governments to set a policy framework for economic development within the boundaries of environmental and resource constraints.
Business is known for its general dislike of tougher regulations, but the frustration of CEOs is evident from the fact that more than half are clear in their call for "hard" measures of intervention, including regulation and standards; 43% call for governments to adjust subsidies and incentives; and 31% seek intervention through taxation.
It's interesting to note their frustration with the lack of progress of voluntary approaches, which are supported by a mere fifth of respondents. Only 15% see "trading schemes and markets" as an effective policy tool, the lowest of any option presented.

CEOs feel unsupported

It is also painfully obvious from the survey results that CEOs feel unsupported by other main sections of society. While nearly two-thirds of CEOs believe consumers are their most important stakeholder when it comes to having an impact on a company's approach to sustainability, they say they get no credit for embedding it into their company practices.
Perhaps more worrying is the continuing lack of interest from investors, which restricts the appetite of CEOs to break from the crowd and take risks. Just 12% of respondents regard investor pressure as among their chief motivators on sustainability, the same figure as 2010, and less than a quarter see investors as an important stakeholder.
These deeply worrying figures are made only slightly less depressing by the 69% who expect investor interest to be an increasingly important factor in building sustainability issues into core business. Given this feeling of powerlessness, it is not surprising that the desire of CEOs to build cross-sector collaboration to drive change continues to grow in popularity. While only 15% of CEOs rank NGOs as among their most important stakeholders, more than three-quarters believe partnerships and collaboration across sectors will be instrumental in the way that their company delivers positive social and environmental outcomes over the next five years.
As the notion of convergence takes hold, CEOs are beginning to see a transition toward long-term partnerships; not single-issue, arm's length co-operation, but genuine collaboration as issues and interests coincide.

Disconnect between challenges and action

Like many survey results, there are a number of contradictions in the responses of CEOs. One of the most striking is the disconnect between CEOs' perceptions of the lack of global progress and their high opinion of their own individual efforts and achievements. More than three-quarters are satisfied with the speed and effectiveness of execution of their own company's sustainability strategy, and nearly two-thirds believe that they are doing enough to address sustainability challenges.
The report concludes: "CEOs clearly recognise the scale of the global challenge — but may not yet see the urgency or the incentive for their own businesses to do more and to have a greater impact. This disconnect suggests that a gap persists between the approach to sustainability of the majority of companies globally — an approach centred on philanthropy, compliance, mitigation and the license to operate — and the approach being adopted by leading companies, focused on innovation, growth and new sources of value."


This content is brought to you by Guardian Sustainable Business in association with the UN Global Compact. Paid for by the UN Global Compact. All editorial controlled and overseen by the Guardian.

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