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technique+enterprise | The CEO’s sustainability guidelines

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October 17, 2024

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The pivot to a sustainable enterprise mannequin begins not with a mountain of compliance duties, however with 4 concrete actions: assessing vitality demand, scanning for dangers and hidden dependencies, finding innovation alternatives, and beginning a knowledge infrastructure overhaul. Even within the face of intensifying stakeholder activism and new laws, CEOs who keep centered on that straightforward guidelines can catalyze business-wide change, serving to to make sure each the corporate’s future viability and the planet’s.

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8 min

Dive deeper:
Unlocking the energy-demand alternative in meals and beverage

The world transition to a sustainable financial system will open up all kinds of alternatives for funding, innovation, and progress. This is hardly a secret to CEOs: 58% of these polled in PwC’s twenty seventh Annual Global CEO Survey mentioned their firm has accomplished or begun initiatives to innovate climate-friendly merchandise, companies, or applied sciences—partially to help decarbonization, but in addition to reply to market demand.

It’s a wise play: latest PwC evaluation reveals that climate-related innovation has a optimistic impact on revenue margin, as do a half dozen different climate-related enterprise strikes, each individually and when analyzed in mixture:

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Locate alternatives for innovation

—Atul Gawande, surgeon and author

Under circumstances of complexity, not solely are checklists a assist, they’re required for achievement.”

Investors, too, see the upside of motion on sustainability: 69% of them mentioned they’d enhance funding in firms that efficiently handle sustainability points related to the enterprise’s efficiency, based on PwC’s Global Investor Survey 2023.

But for a lot of CEOs, these alternatives can appear like a metropolis shimmering on a distant hill. Standing in the best way is an enormous thicket of stakeholder calls for and new laws. Take the EU’s Corporate Sustainability Reporting Directive (CSRD), which is able to have an effect on some 50,000 firms within the bloc and past. Reporting necessities for CSRD compliance determine greater than a thousand particular person information factors for disclosure, protecting not simply perennial reporting subjects, comparable to local weather change, but in addition some much less acquainted to many
C-suite groups, comparable to round useful resource use and biodiversity. Amid competing urgencies, there’s a threat that companies will fall right into a grinding, inefficient cycle of compliance box-ticking.

How can CEOs keep away from that lure? By making a daring enterprise case for sustainability, one which’s laser centered on worth, progress, and, finally, enterprise mannequin reinvention.

Sticking to that long-term mission whereas managing rapid enterprise obligations received’t be simple. That’s why we’ve provide you with a guidelines. Not one full of a zillion compliance duties, however one consisting of 4 focused enterprise actions that CEOs can full to set significant change in movement:

If you wish to create worth with sustainability strikes, begin by taking a tough have a look at useful resource use and vitality consumption. This means tackling the so-called vitality trilemma: the triple problem of concurrently making certain a dependable vitality provide, lowering emissions, and trimming prices. The excellent news is that modifications to the world’s vitality programs, and to the markets driving these programs, are placing new choices for managing vitality demand into play.

Consider latest PwC evaluation of a giant world meals and beverage firm. By analyzing publicly out there details about its operations, comparable to its fleet and services and its company and retail websites, the research decided that the enterprise may recoup roughly 60% of its present vitality prices, or about US$300 million, by implementing a broad suite of demand-side modifications, together with:

Dive deeper:
Managing nature dangers

Pinpointing nature-risk publicity throughout a posh provide chain received’t be simple, which makes it essential to get a panoptic, data-informed view of the corporate’s sustainability actions.

Another doubtlessly hidden threat: local weather threats to commodities comparable to meals crops, very important metals, and important minerals. Climate change is growing the incidence of warmth stress and drought at farms and mines all over the world, and even in a low-emissions situation, these threats are projected to get a lot worse. For the mining of some essential commodities—bauxite and iron, for instance—the specter of warmth stress for employees is already appreciable:

When PwC’s Global CSRD Survey 2024 requested enterprise leaders to evaluate the obstacles to implementing the brand new laws, one issue ranked above all others: information availability and high quality. An absence of granular, auditable information collected in a routinized approach from alongside the corporate’s worth chain makes calculating emissions, vitality use, useful resource depletion, and different impacts rather more troublesome. It’s a problem that one other PwC research cites as a purpose that firms in ten out of 11 financial sectors should not on monitor to realize their decarbonization targets. Robust information can be important for assembly the expectations of buyers: 75% of these polled in PwC’s Global Investor Survey 2023 wished reliable info on an organization’s environmental and societal impacts; 94% of them didn’t suppose they had been getting it.

Better information requires higher instruments. Yet simply 26% of firms collaborating in PwC’s Global CSRD Survey 2024 have a centralized system for storing and managing sustainability information:

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Ron Kinghorn
Sustainability Strategy
and Operations Leader,
Principal, PwC US

Renate de Lange
Global Sustainability Markets Leader,
Partner, PwC Netherlands

Will Jackson-Moore
Global Sustainability Leader,
Partner, PwC UK

Unlocking the energy-demand alternative in meals and beverage

Ten questions for a successful climate-transition enterprise technique

The energy-demand alternative: How firms can thrive within the vitality transition

PwC’s Global CSRD Survey 2024

How local weather adaptation can each shield and develop what you are promoting

From trade-offs to payoffs: CEOs on creating worth with local weather motion

Further studying: Go deeper on sustainability and enterprise mannequin change

Amy Cai
Sustainability
Managing Partner,
PwC China

Explore the podcast sequence from technique+enterprise, which convenes a worldwide group of solvers to sort out the world’s most essential issues

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Effective demand-side motion can do greater than decrease vitality spending, cut back emissions, and enhance reliability of provide. In addition to addressing the trilemma, it could actually truly result in new income streams. PwC analysis reveals that such demand-side strikes fall into 4 primary classes:

CEOs shouldn’t go after the upside with out managing the dangers. And although chief executives appear to be making good progress on the previous (58% of respondents in PwC’s twenty seventh Annual Global CEO Survey mentioned their firm has innovated climate-friendly merchandise, companies, and applied sciences, for instance), progress on the latter has been slower. Fewer than half of CEOs have initiated or accomplished plans to include local weather dangers into monetary planning and to guard their firm’s bodily property and workforce from local weather threats.

An even smaller share of CEOs have invested in nature-based local weather options, a discovering that factors to a possible blind spot in sustainability plans: nature dependency. A PwC research discovered that 55% of world GDP, or about US$58 trillion, is reasonably or extremely depending on pure ecosystems comparable to wetlands, forests, oceans, and aquifers. The direct operations of 5 industries—representing an financial worth equal to 12% of world GDP—are all extremely dependent, that means disruptions to the ecosystems they depend on could possibly be catastrophic.

October 2024

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Reinventing what you are promoting for a sustainable future begins with 4 mission-critical actions.

Illustrations by Paul Weston

Zubin Randeria
ESG Leader,
Partner, PwC UK

Kevin O’Connell
Sustainability Reporting and Assurance Leader,
Partner, PwC US

Ivy Kuo
Asia-Pacific Sustainability Leader,
Partner, PwC China

Initiate a knowledge infrastructure overhaul

overhaul

infrastructure

information

Initiate a

The advantages of a knowledge infrastructure overhaul transcend reporting. That complete view of your organization’s sustainability impacts also can yield efficiency insights, which, in flip, can inform the sorts of strategic enterprise choices that drive progress.

Most CEOs’ efforts to convey their firm’s information capability on top of things will transcend a mere improve. Leaders might want to create a plan to develop new programs, assurance processes, and crew constructions. Some firms might be able to increase the programs presently getting used for monetary information. Others ought to take into account making a central repository, or information lake, which may function a hub that connects information sourcing, administration, and reporting actions.

Dive deeper:
Data for the sustainable enterprise

Do an vitality
demand evaluation

By the tip of the last decade, firms worldwide may save US$2 trillion by lowering their vitality depth utilizing presently out there applied sciences.

Source: World Economic Forum,
, 2024

Sources: ENCORE database, EXIOBASE, S&P Capital IQ, PwC evaluation

More than 50% of the market cap listed on 19 giant inventory exchanges is uncovered to materials nature dangers.

Scan for dangers and hidden dependencies

Source: PwC’s twenty seventh Annual Global CEO Survey

Companies that innovate new climate-friendly merchandise, companies, and applied sciences take pleasure in a revenue margin premium of 4.5 share factors.

Locate alternatives
for innovation

Source: PwC’s Global CSRD Survey 2024

Just 1 / 4 of firms in a latest PwC survey have a centralized storage system for sustainability information.

Initiate a knowledge infrastructure overhaul

Transforming vitality demand

evaluation

vitality demand

Do an

Tapping into that worth begins with an evaluation of the place new applied sciences and market mechanisms will be deployed throughout the corporate. The reality is that many demand-side performs include readily achievable modifications to infrastructure and operations—comparatively simple wins that make good enterprise sense.

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and hidden dependencies

Scan for dangers

Indeed, excessive warmth, which may decrease productiveness by making out of doors work unsafe, is a transparent and current enterprise menace for a lot of firms.

The pressing must adapt to local weather change is altering the best way firms assess threat and develop resiliency plans. But it additionally presents alternatives, prompting companies to develop options—comparable to hurricane-resistant constructing supplies or novel insurance coverage merchandise—that may assist clients adapt to the local weather disruptions which can be already right here and people nonetheless to come back.

Locate
alternatives for innovation

Dive deeper:
Ten questions for a successful climate-transition enterprise technique

It’s nearly an article of religion amongst some enterprise leaders that taking motion to scale back an organization’s environmental or societal influence entails expensive trade-offs. But latest evaluation of information from PwC’s twenty seventh Annual Global CEO Survey suggests this isn’t essentially the case. The analysis reveals that enterprise actions associated to local weather change even have a optimistic impact on monetary efficiency:

Of the seven actions studied, innovating new climate-friendly merchandise, companies, and applied sciences was linked to the best revenue margin premium.

That discovering aligns with latest analysis led by George Serafeim, a professor at Harvard Business School. His crew studied 3,610 publicly listed firms and located not solely that the variety of organizations growing local weather options has grown considerably, and throughout a number of sectors, but in addition that companies introducing local weather options to their product portfolio take pleasure in a income progress premium of two to a few share factors.

It all provides as much as a transparent CEO precedence: as economies transition to a low-carbon future, leaders ought to search for alternatives to reply to sustainability-driven market shifts. Of course, launching any enterprise enterprise comes with challenges. Serafeim identifies 5 that firms ought to acknowledge when setting climate-transition methods: two of those challenges (behaviors and time) relate to the demand for local weather options and the opposite three relate to the availability.

Chief executives who meet these challenges—and concentrate on innovating local weather options that reply to market demand in a well timed approach—can notice the expansion potential inherent within the shift to a sustainable world financial system.

Portrait by Noli Novak

—George Serafeim, professor at Harvard Business School

The transition to a low-carbon financial system is a monumental enterprise for society—and for firms. As this transition progresses, companies will discover immense alternative to develop and deploy new services and products that meet clients’ wants and enhance their lives.”