Most companies now view sustainability as a key value creation opportunity, with over three-quarters expecting benefits such as increased revenues and profitability, along with lower capital costs, despite anticipating higher sustainability-related expenses and substantial investment needs.
The report, “Sustainable Signals: Understanding Corporates’ Sustainability Priorities and Challenges,” surveyed over 300 public and private companies with revenues exceeding $100 million across North America, Europe, and Asia Pacific, representing diverse industries.
Key findings reveal that 85% of companies see sustainability as a value creation opportunity, with 53% focusing on value creation and 32% on both value creation and risk management. Only 15% prioritize sustainability primarily as risk management, and a mere 1% believe sustainability is not material to their long-term strategy.
Sustainability as a value creation opportunity was cited as “very significant” by 50% of companies, followed by compliance with government regulations (48%) and moral obligation (47%).
The survey shows that over 80% of companies foresee financial benefits from their sustainability strategies within the next five years. Specifically, 81% believe sustainability is likely to drive higher profitability, 79% see it boosting revenue, and 82% expect improved cash generation capabilities.
Additionally, 77% of respondents anticipate lower costs of equity or debt due to sustainability.
However, companies also acknowledge the challenges and costs associated with sustainability. 69% expect increased costs from changing processes, 72% foresee higher costs or legal risks from sustainability regulations, and 73% predict higher costs or raw material scarcity over the next five years.
Restructuring supply chains to meet human rights obligations is seen as a significant challenge by 74% of companies.
High investment levels are viewed as a major barrier to sustainability by 31% of companies. Furthermore, 28% cite conflicts with financial goals, and 22% find it difficult to justify the short-term negative financial impact despite long-term benefits.
The study also highlights that 92% of companies expect climate change to affect their business models by 2050, with 23% already experiencing risks similar to technological changes, competitor actions, and supply chain instability.
Lastly, the survey underscores a need for enhanced sustainability expertise at the board level. 57% of respondents believe board members need more knowledge about sustainability regulations, 43% in sustainability-labelled financial instruments, and 40% in sustainability disclosure. Overall, only 37% of companies feel their boards possess sufficient sustainability expertise.
