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New Deloitte research highlights increasing business concern about climate change; reveals disconnect between ambition and impact

Key highlights:

  • Ninety-eight percent (97% globally) of South African companies surveyed have already felt the effects of climate change—triggering a greater sense of urgency to act now
  • A series of actions emerge as a model for driving climate impact
  • South African CxOs say their companies are more concerned about climate change than their global peers

South Africa, Johannesburg (19 January 2022) — Released today, Deloitte’s 2022 CxO Sustainability Report: The Disconnect Between Ambition and Impact, reveals that local and global C-level business leaders (or CxOs) are increasingly concerned about climate change and see the world at a tipping point to act.

According to the report findings, South African executives feel pressure to act on climate change more than their global peers with pressure coming from a broad range of stakeholders including shareholders, customers, boards, governments and regulators, civil society as well as competitors and employees.

Eighty-nine percent of CxOs agree there’s a climate crisis and 63% say their organisations are very concerned. Yet, they are struggling to fully embed sustainability into their core business strategies, operations, and cultures. 

“The battle against climate change isn’t a choice, it’s billions of choices,” says Deloitte Global CEO Punit Renjen. “No action is insignificant, but certain activities and decisions ‘move the needle’ more than others, and those bolder actions from business leaders are needed now—while there’s still time to limit the damage. It’s time to prove we’re up to the challenge.”

South African executives have been found to be ahead of most of their global peers on almost all aspects of climate change, including the need to act as well as the role of government. Seventy-seven percent of South African executives say their organisations are concerned about climate change, against 63% globally. Fifty-four percent of executives expect climate change to have a very high impact on their company strategy over the next three years, while 44% expect it to have mild impact and 2% say they expect it to have little or no impact.

“Climate change is one of the biggest challenges of our time and Africa is one of the most adversely affected regions. It is heartening to see that our executives have a heightened sense of urgency about the climate crisis,” says Anne Muraya, Responsible business and Public Policy Managing Partner at Deloitte Africa.

Almost all respondents, with 98% in SA and 97% globally, say they have been impacted by climate change over the past year. This ranges from employee health issues, including mental health with 52% of SA executives citing this against 37% globally. Fifty percent of SA respondents say they had to modify processes such as manufacturing, against 40% globally.

Companies say they feel the most pressure from shareholders to act on climate change followed by consumers/clients/customers and board members and management.

The report further found that while companies are acting “there is a disconnect between ambition, action and impacts” according to Deloitte. Two-thirds of CxOs said their organisations are using more sustainable materials and increasing the efficiency of energy use; more than half have adopted energy-efficient or climate-friendly machinery, technologies, and equipment; and a majority are intentionally reducing air travel and training employees on their climate actions and impact.

While all sustainability actions are important, Deloitte’s analysis of the report has identified five “needle-moving” actions that, especially when taken together, demonstrate a deeper understanding of the business benefits of sustainability. They are:

  • Developing new, climate-friendly products or services.
  • Requiring suppliers and business partners to meet specific sustainability criteria.
  • Updating or relocating facilities to make them more resistant to climate impacts.
  • Incorporating climate considerations into lobbying and political donations; and
  • Tying senior leader compensation to sustainability performance.

More than one-third of organisations surveyed have implemented only one of these actions. While concern for the environment and optimism for change both remain strong, organisations will increasingly need to consider taking more decisive action to limit the worst impacts of climate change.

Muraya points out that when it comes to acting against climate change, South Africa is ahead of the global average by more than 10 percentage points in some cases.  

For instance, when it comes to the use of sustainable materials, such as recycled products, 79% of South African companies are doing this, compared to 67% for the global average. Seventy five percent of South African respondents say their companies have increased the efficiency of energy use, compared to 66% for their peers globally. While 60% of South African respondents say their companies have purchased insurance against extreme weather risks, only 46% say they have done so globally.

South Africa also ranks higher than the global average on steps that are considered harder to implement, such as requiring suppliers and business partners to meet specific sustainability criteria (51% against 46% globally) and updating or relocating facilities to make them more resilient to climate impact (53% against 44% globally).

CxOs also chose brand recognition and reputation, customer satisfaction, and employee morale and well-being as three of the four top benefits of their companies’ sustainability efforts, suggesting many CxOs see climate actions as beneficial to their relationships with their stakeholders.

The lowest-ranked benefits (revenue from both longstanding and new business, asset values, cost of investment, and operating margins) suggest CxOs continue to struggle with the short-term costs of transitioning to a low carbon future.

“Not all businesses are at the same stage in their climate journeys, but all companies will soon need to move from ‘why’ to ‘how’ with their own customised approach,” says Renjen. “However, these actions are important markers of leadership as they require having a mindset that sees both the risks of inaction and the opportunity of sustainability, a culture that embeds climate directly into business strategy, buy-in from senior leaders, and the ability to influence third parties, including business partners, government, and regulators.”

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