Taking action to address climate change is not just about doing the right thing; CEOs around the world are starting to appreciate that it is also a unique opportunity to create value in their business. However, there is still some way to go before this realization becomes universal.
Nearly a third (30%) of global CEOs say that climate change will drive the way their companies create, deliver and capture value to a large or very large extent over the next three years, up from 22% who said it drove company actions in the past five years, according to PwC's 27th Global CEO Survey. But that still leaves a substantial number of CEOs who haven't yet grasped the unique opportunity that climate action presents for their businesses.
There are tangible benefits for a business in addressing climate change, regardless of the type of industry it operates in or its location - it can boost revenues and profitability, build trust with employees and grow shareholder value.
First, addressing climate change can drive business revenues and profitability. While the common perception is that taking climate action can require a trade off with financial growth, in reality the opposite is often the case, as our Global CEO survey shows.
Indeed for virtually every type of climate-related business action, CEOs completing the action reported higher profit margins and revenue growth than CEOs who said their companies have no action plans. Actions that can deliver this profit margin and revenue growth premium include innovating new climate-friendly products, services and technologies, implementing initiatives to upskill the workforce, and investing in nature-based solutions.
Taking decisive action on climate change appears to correlate with businesses' long-term prospects. Those CEOs who report taking more action to address climate-related opportunities and risks are more likely to express confidence about the future of their business over three-year and ten-year timeframes. That's a huge win, not just for the business itself but for our wider global economy and society, with stable businesses more able to provide secure long-term jobs and generate growth in revenues and profitability.
Second, it represents a significant opportunity to build trust with their employees. Many employees are increasingly worried about what impact climate change could have on their jobs and livelihoods - PwC's latest Global Workforce Hopes and Fears survey found that 37% of employees think that climate change will impact their job to a large or very large extent over the next three years, with 75% saying it will have at least some impact.
Of these, more than a third expect to need new skills to adapt processes, services and products as the planet warms, while 44% of workers think that climate change will increase health and safety risks at work, for example through exposure to heat stress and air pollution.
These concerns represent a major opportunity for businesses to reassure their employees that they are taking their fears seriously. Some CEOs have already begun to take action: 44% have begun or completed to implement “green” upskilling initiatives for their workforce, with another 23% planning to do so. Meanwhile 46% of CEOs say they’ve begun or completed actions to protect their physical assets or workforce from climate risk, for example by investing in infrastructure, training and protective equipment to mitigate climate risk, while another 21% are planning to. However, that still leaves a third of CEOs with no plans to do either.
Third, taking action to address climate change is an opportunity for businesses to grow shareholder value by addressing the needs and requirements of investors, who place increasing value on a company's actions to address the impact of climate change on their operations.
Three-quarters of the respondents to PwC's Global Investor Survey said that the way in which companies manage sustainability-related risks and opportunities is an important factor in their investment decision-making. Indeed, the majority of investors (69%) said they would increase their level of investment in companies that successfully manage relevant sustainability issues. Meanwhile most private equity firms believe that action on sustainability can help create value, according to PwC's Global Private Equity Responsible Investment Survey.
The theme for this year's Climate Week NYC is It's Time. As the world moves towards net zero, it's time for more businesses to stop seeing climate action as simply an obligation and instead begin to embrace it also as a unique opportunity to improve the bottom line, build employee trust and increase shareholder value - and, ultimately, transform their companies for long-term success while contributing to global efforts to accelerate the climate transition.