Obligation or opportunity: What’s driving corporate sustainability?

Hands of farmer nurturing plant

While COVID-19 may have hampered some organisations’ sustainability efforts, there remains significant pressure on businesses across all sectors to reduce their carbon footprint and contribute to the UK’s zero carbon targets.

But what is driving corporate sustainability? Is it purely policy-driven, or are other factors playing a part? As part of our ‘Sustainability in the C-Suite’ report, we spoke to the UK’s business leaders to find out what pressures they are under, and whether sustainability is simply a box to tick or a serious concern.

Impact on business reputation

We spoke to over 80 financial directors from businesses across a range of industries, from manufacturing to financial services, and asked them about the drivers to implementing a carbon reduction plan. The biggest driver reported was the impact on the business’ reputation, at 51%.

With the work of environmental activists such as Greta Thunberg pushing sustainability further into public view, it’s unsurprising that big businesses are concerned about their reputation. Stakeholders and investors are becoming more interested in an organisation’s green credentials and when an organisation does not live up to expectations, customers and investors will act.

Similarly, our recent research found that consumer expectations were a significant driver for implementing a carbon reduction plan – at 41%. Customers are increasingly expecting the businesses they buy from to address their impact on the environment and businesses are starting to take action.

Further pressure comes in the form of Environmental, Social and Governance (ESG) criteria, which allow stakeholders to determine how well business leaders are doing when it comes to environmental and social matters. Businesses are being urged by investors to become more responsible in a measurable and transparent way. Recently we’ve seen some companies take ESG one step further, with news that Apple is to link its executives’ pay to ESG targets.

Sustainability in the C-Suite

Another key driver relates to mandatory emissions reporting measures, with 26% of our respondents highlighting this as a motivator for carbon reduction. Introduced in 2019, Streamlined Energy & Carbon Reporting scheme (SECR) is one of the most recent reporting schemes that financial directors face, requiring organisations to publish details of their carbon footprint in their Annual Directors’ Report.

Although some businesses will simply view it as a box-ticking exercise, SECR can play an important role in bringing sustainability into the boardroom and be used to get board level buy-in on sustainability initiatives. When asked about their experience of SECR, 11% of respondents said that SECR had encouraged their business to invest more in energy efficiency and sustainability measures.

Supply chain pressures

20% of respondents stated that they have implemented carbon reduction measures as a requirement of the supply chain within which they operate. Every business must play its part in achieving Net Zero, so it’s encouraging to see that those at the top of the chain are helping to bring others in line with their sustainability standards.

Corporate sustainability in the spotlight

The focus on corporate sustainability shows no signs of slowing down. And while progress has been made – just recently the National Grid announced that 2020 was the greenest year on record for Britain’s electricity – there is a long way to go on our transition to net zero. According to the Climate Change Committee, “if business is not encouraged to invest; if the people of the UK are not engaged in this challenge – the UK will not deliver Net Zero by 2050. The 2020s must be the decisive decade of progress and action.”1

Download the report in full here

[1] – https://www.theccc.org.uk/wp-content/uploads/2020/12/The-Sixth-Carbon-Budget-The-UKs-path-to-Net-Zero.pdf