Post on 13-Dec-2015
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Leadership in a changing climate
PwC CEO Pulse Poll of leaders on climate change
Embargoed to 0001 CET 4 September 2015
PricewaterhouseCoopers LLP, 1 Embankment Place. London, WC2N 6RH T: +44 (0)20 7 583 5000, F: +44 (0)20 7 822 4652, www.pwc.co.uk
PwC CEO Pulse Poll of leaders on climate change
Introduction
Every CEO wants to be remembered for a long-term vision that shapes the future of their company. Yet
the pressure to deliver short-term and largely financial success all too often gets in the way of creating
a lasting legacy.
There’s no clearer example of this than the way CEOs have
handled the issue of climate change. Many global
companies acknowledge the reality of climate change and
that it will impact their business. Yet, aside from a few very
vocal advocates, CEOs have, up until now, tended to look at
climate change through the short-term, tactical lens of
rising energy costs and making energy efficiency
improvements.
As climate change starts to affect access to raw materials, the reliability and security of global supply
chains, and even the type of products and services consumers demand CEOs must also take a strategic
view – one that looks to the short, mid and long-term, to identify both the risks and opportunities for
their business.
The upcoming UN Climate Summit in Paris (COP21) in December appears set to increase both risks
and opportunities for global companies. So where do CEOs stand on climate change and how can they
provide leadership now in order to deliver a lasting legacy?
PwC’s most recent Annual Global CEO Survey reported that 61% of CEOS saying they see more
opportunities for growth today than there were three years ago. And in our 17th Annual Global CEO
Survey released in 2014, when we asked specifically about megatrends, 46% of CEOs agreed that
resource scarcity and climate change was set to transform their business.
In this latest pulse, we asked CEOs from all over the world to focus on growth in the context of climate
change. Are they weighing up the risks but also considering the opportunities for growth from climate
change? And are they responding by building strategies for short-term and long-term business
success?
Energy cost concerns and the connection to regulation
It might seem counterintuitive that CEOs should be concerned about the effect climate change will
have on energy costs at a time when fossil fuel prices are low and supplies are abundant. Nevertheless
61% said that a rise in energy prices was the main threat posed to their company by climate change and
over half (56%) highlighted the risk posed by new government climate change regulation. Of those it
was the biggest companies (over $1bn turnover) that expressed the most concern over regulation.
This may be short-term analysis on their part as a global climate deal that aims to limit emissions to
meet the 2oC goal - or even a 3-4oC outcome - would inevitably lead to regulation that would see the
cost of energy rise in the short term.
Dig a little deeper though and CEOs are also concerned about strategic issues such as the risk posed to
their global supply chains by climate change (51%), and securing access to raw materials (49%). So
Every CEO wants to be
remembered for a
long-term vision that
shapes the future of
their company.
Leadership in changing climate
PwC CEO Pulse Poll of leaders on climate change
while a broader base of CEOs see climate change through the lens of greater regulation and higher fuel
bills, a smaller, leading, group is emerging that also view climate change from a strategic perspective.
They‘re concerned with their whole value chain, from the supply of raw materials, to production and to
the end customer.
Regionally, CEOs in Western Europe and Asia Pacific expressed the most concern about new
government regulation (59% and 58%). Asian and Latin American CEOs were more concerned about
supply chain disruption (58% and 62%) than their North American counterparts - possibly as they’re
already feeling some of the effects first hand. When it comes to industry sectors, a higher proportion of
financial services CEOs don’t see climate change as a risk to their business models compared to other
sectors, which could highlight a disconnect with the sectors they finance.
Laudable motives but missing the opportunities
Given their concerns over governmental regulation and the
impact of potential higher energy prices you might think
that CEOs would cite hard-headed business thinking when
asked what motivates them personally to take action on
climate change.
Instead, more than 80% told us that what motivated them personally to direct their business to take
action on climate change was a desire to protect the interests of future generations – a natural and
personal response. But does this sentiment result in cold, hard business decisions on climate action?
In the context of an ambitious climate deal, CEOs will need to align their desire to do right for future
generations with formulating strategies that will make their own business more resilient and adaptable
to succeed in a climate-change aware economy.
Does wanting to protect the
interest of future generations
result in cold hard business
action?
Leadership in changing climate
PwC CEO Pulse Poll of leaders on climate change
Our survey shows increasing evidence that an emerging
group of leading CEOs do understand the business case for
being proactive. Three in five surveyed (63%) said they
were personally motivated by creating a reputational
advantage. Just over half identified improving shareholder
value as a motivator. They also realise success won’t be
achieved in isolation. 58% of CEOs said their companies
are partnering with suppliers to address climate change
risks and opportunities and the same percentage are doing
so with business partners. And 55% said they were
collaborating with consumers on these issues.
Even greater collaboration would help. Less than a quarter of CEOs said their companies were
partnering with competitors and just 27% were reaching out to investors. The former is perhaps
understandable though, in broader areas of sustainability, pre-competitive collaboration within
industry sectors such as apparel, beef and forestry have been shown to accelerate smart thinking and
action. The lack of dialogue with investors suggests that even the more forward-thinking CEOs are only
just starting to identify how climate change will impact their company’s value and profits.
Overall, the leading CEOs realise that there are crucial business reasons for integrating climate change
strategies into their planning - from supply chain to marketplace, both from a revenue growth and risk
management perspective - and are taking action to do so. Making these benefits clear and measurable,
and communicating them widely, will be important to build deeper confidence in the business
community, with government and with the public.
An emerging group of CEOS are proactive
about integrating climate change
strategies into their business
Leadership in changing climate
PwC CEO Pulse Poll of leaders on climate change
Smarter sustainable thinking = smarter products and smarter operations
Consumers are starting to understand that more
sustainable products no longer means compromising on
quality or style. The automobile industry, with the arrival of
electric vehicle company Tesla, and innovation by
traditional carmakers offers a high profile example of this
shift in perception.
The domestic energy sector, where improvements in solar
power capacity are starting to reshape the relationship
between consumers and suppliers, is another - although
myths about the cost and reliability of renewables, access to
finance in some markets and inconsistent regulation
haven’t helped.
When we asked CEOs what actions they’d taken in response to climate change risks, three quarters
(75%) told us their company had developed more sustainable products and services. Western
European and Latin American companies were most active in this area; those in Asia Pacific and North
America less so. Over half (54%) were making strategic investments to take advantage of green growth
opportunities.
When you take into account that 61% of CEOs are also changing how they manage climate change
related business risks and 61% on how they take pollution levels into consideration in operational
planning, it’s clear that many companies are taking active steps to become more sustainable
businesses. They are doing so even if these actions are not yet being evaluated as a joined up corporate
strategy or translating into tangible revenue growth.
Consumers are
starting to
understand that more
sustainable products
no longer means
compromising on
quality or style.
Leadership in changing climate
PwC CEO Pulse Poll of leaders on climate change
Get the executive board on board
It’s clear from our findings that different divisions in CEOs’ companies are taking active steps to
mitigate risk and seek business opportunities from the challenges posed by climate change. However,
it’s also clear that many CEOs have yet to shape these different activities into a cohesive business
strategy and narrative to communicate internally and externally.
Over half of CEOs surveyed say their board discusses climate change and extreme weather risks only
when it impacts them (that was especially true of those from Western Europe). On the other hand, half
of CEOs said they table this at least once a year with the board.
The tendency to react to climate change rather than discuss it proactively isn’t so surprising, given that
extreme weather and climate change is often still viewed through the lens of crisis and risk
management, rather than strategic business planning.
The more CEOs come to view climate change and sustainability as an opportunity for growth as well as
a business risk (just 34% of CEOs told us that was case currently) the more likely it will command the
attention of the top table more frequently – particularly if targets and incentives for executives are also
aligned to delivering on climate change goals.
To Paris and beyond
The COP21 summit in Paris will generate headlines from now until early December.
But CEOs tell us the potential for a binding agreement isn’t the main driver for climate change action
in their sector. Taken literally that’s undoubtedly true – even a strong global agreement between
governments will seem removed from the world of day-to-day business.
Leadership in changing climate
PwC CEO Pulse Poll of leaders on climate change
And yet, a successful Paris accord will be the catalyst for major change on a national and regional level
– a form of trickle down climate legislation that will have ramifications for all of business.
77% of CEOs said a clear, consistent and long-term national government policy framework would drive
real climate change action in their sector. A COP21 agreement could give some governments the
license to regulate in areas not previously touched on.
It isn’t just the big stick of regulation that will drive change. 65% of CEOs say that improved access to
government funds for ‘green’ business will help. Yet an even bigger driver for CEOs is consumer clout.
80% of them said greater public awareness and engagement around climate change would spur their
sector into action, while 67% said demand for low carbon goods and services is important.
Essentially, CEOs are telling us they want to governments to lead (and remove market uncertainty)
with clear, consistent and long term regulation, and raise public awareness to gain the support of the
consumers. Business will follow with lower carbon, more climate resilient products, services and
solutions, and some of the finance.
Leadership in changing climate
PwC CEO Pulse Poll of leaders on climate change
Leadership in a changing climate
It’s clear to us at PwC that CEOs are on a “climate
leadership” journey. At the very start of the journey are the
sceptics - CEOs who, so far, either don’t believe that
climate change is happening or don’t see it as a business
issue.
Further down the path are what we call the ‘operationalists’
– a pragmatic group of CEOs whose focus is on reducing risk and costs through energy efficiency
strategies and operations - what well-managed company wouldn’t focus on reducing its fuel bills?
Further still along the climate leadership journey are what we see as the ‘opportunity seekers’ - CEOs
who are taking a more strategic view. They’ve identified the revenue opportunities to develop new
sustainable products and services, invest in new green growth opportunities, manage the risks of
climate change more closely, protect resource and raw material availability and cost through resource
efficiency and support biodiversity. Leading the journey are a small but growing number of CEO
‘advocates’ who are taking an activist stance with policy makers and making their voices heard
publically on the business reasons for tackling climate change.
As CEOs continue on their own climate change journey, they’ll need to reconcile their long-term vision
with their needs for short-term success. Ultimately, by replicating the focus and drive that has
delivered results within three and five year timelines, and aligning it with both tactical and strategic
climate change action, CEOs can drive sustainable growth that’s good for the planet and for their
companies. That would be a legacy all CEOs could be proud of.
It’s clear to us at PwC
that CEOs are on a
“climate leadership”
journey
EIGHT STEPS TO CLIMATE LEADERSHIP
1. Identify the business case for climate change action.
2. Put in place a strategy to manage the risks and opportunities in both the short- and long-
term
3. Go beyond direct operational impacts and consider the implications from supply chain to
customer
4. See regulation as an opportunity not just as cost and risk
5. Take the discussion to the board on a regular basis
6. Consider partnering with others, speak to suppliers and customers
7. Consider a climate change strategy as a key competitive advantage
8. Set ambitious targets, hold people accountable, and incentivise success
Leadership in changing climate
PwC CEO Pulse Poll of leaders on climate change
Media information:
About PwC Sustainability & Climate Change team
PwC’s sustainability and climate change advisory team was established in 2007, and combines 800 experts globally, with over 100 in the UK. Specialists work with public and private sector clients focusing on emerging issues of climate change policy, economics and development, sustainability/CSR strategy, supply chain, ethical sourcing / tracking, responsible investment, measurement, international development / sustainable development goals, reporting and assurance.
For more information see www.pwc.co.uk/sustainability. Follow the team’s latest views in our blog or @pwcclimateready.
For briefing/interviews please contact: Rowena Mearley, PwC Media Relations
T: +44 207 213 47 27/ + 44 7841 563 180
Email: rowena.mearley@uk.pwc.com.
@rowenamearley