An annual grilling of CEOs around the world has produced an insight on emissions targets that may worry climate campaigners.
The 25th annual PwC CEO survey reveals that despite growing interest in environmental, social and governance (ESG) issues, corporate strategies remain largely driven by “business metrics”. Just 37% of CEOs said carbon emissions targets were included in their long-term corporate strategy, while only 13% could say it was included in their bonus or long-term incentive plan.
Race and ethnicity representation were embedded in only 23% of corporate strategies and 8% of remuneration schemes. Gender diversity did mildly better, scoring 38% and 11% respectively.
Meanwhile the most popular non-financial measures remain customer satisfaction, used by 71% of long-term strategies and 39% of executive pay plans. Employee engagement is the next most popular metric.
CEOs and emissions targets
While 57% of CEOs say they do not have meaningful greenhouse gas emissions, a worrying 55% also say they do not have the “capabilities” to measure emissions. Nearly a quarter, 24%, say they’re “not confident” of being able to fulfil a greenhouse gas emissions targets while one fifth, 22%, simply say they “cannot financially afford to make a carbon-neutral or net-zero commitment”.
Despite the figures, PwC remains upbeat saying “very few” CEOs are avoiding sustainability commitments “out of a belief that their stakeholders (internal or external) don’t care about climate change or because they can’t afford to do it”.
Proctor & Gamble chair David Taylor, says the pressure is on companies to move on climate change. “What has changed from, say, ten years ago is that the consumer now wants to know the values of the companies behind the brands they buy,” he says in the PwC report.
“That’s becoming increasingly important, especially for younger consumers. Moreover, what you need to do to be considered good at ESG has changed dramatically. Companies like our need to have ambitious plans.”
Science-based approach
PwC says the difference may be one of approach. Companies that make serious “science-based” commitments to net-zero are more likely to embed emissions targets into corporate strategy. In fact 70% do so. However, weaker commitments produce flimsier links to strategy. Of companies with a “non-science” commitment, only 44% had integrated emissions into their strategies.
Of course, even though the public discourse around sustainability and climate change may be intense, it is not the only context in which businesses function. When PwC asked CEOs about their “specific assets, capabilities and relationships” and industry long-term trends all said they favour the creation of “financial value” more than cutting greenhouse gases. Only the regulatory environment was better at shifting focus to emissions.
PwC says boards need to talk to CEOs about their “inbox” problem, or list of priorities. “Enthusiasm about ESG won’t make near-term financial demands go away.
“Indeed, in a world of scarce time, attention and corporate resources, framing trade-offs realistically may be only way to bring investors along and create a prudent strategic agenda, as opposed to a wish list.”