A significant majority of CEOs are planning, currently undertaking, or have already completed a series of actions to prepare their companies to address the risks and opportunities presented by climate change, including two thirds looking to upskill or reskill their workforce, and more than three quarters innovating new, climate friendly products or services, according to a new global CEO survey released by professional services firm PwC.

For the study, PwC’s 27th Annual Global CEO Survey, PwC surveyed more than 4,700 CEOs across 105 countries.

The survey indicated that CEOs are more optimistic about global economic growth than in the prior year study, with fewer than half (45%) anticipating a decline in growth over the next 12 months, compared to 73% last year, with lower perceived exposure to factors such as inflation, economic volatility and geopolitical conflict.

As perceived exposure to near-term factors have eased, however, the study found an increased focus on long-term megatrends such as climate change and technological disruption, with an increasing number of CEOs reporting that they are less confident in their companies’ viability over the next decade on their current path – 45% vs 39% last year – leading to increased initiatives to reinvent their business models.  

Bob Moritz, Global Chair, PwC, said:

“As business leaders are becoming less concerned about macroeconomic challenges, they are becoming more focused on disruptive forces within their industries. Despite rising optimism about the global economy, they are actually less optimistic than last year about their own revenue prospects, and more acutely aware of the need for fundamental reinvention of their business. Whether it is accelerating the roll-out of generative AI or building their business to address the challenges and opportunities of the climate transition, this is a year of transformation.”

Respondents listed climate change as having one of the most significant increases as a factor driving change in the way their companies will create, deliver and capture value, with 30% of CEOs anticipating a “large” or “very large” change over the next three years, compared to only 22% over the past 5 years.

Initiatives anticipated or underway by companies related to climate change reported by the CEOs included improving energy efficiency, with 65% now undertaking, 10% completed, and another 14% planning actions in this area; 58% in progress or completed and 20% planning new, climate-friendly products technologies or services; 47% in progress or completed and 21% planning initiatives to protect assets and workforces from climate risk, and 44% in progress or completed and 23% planning the implementation of initiatives to upskill or reskill their workforce.

Despite the progress on climate-related initiatives, however, the survey found that many CEOs are not likely to pursue several of these actions, including 31% who have no plans to incorporate climate risk into their financial planning, 30% not anticipating reskilling or upskilling implementation, and 29% with no plans for protecting assets and workforces from climate risk.

One of the key findings from the survey is an apparent increase in acceptance by CEOs of lower rates of return for climate-friendly investments, with over 40% of respondents reporting that their companies have set a lower hurdle rate for these, compared with other investments. Of those accepting a lower rate of return, most reported hurdle rates between one and four percentage points lower.

Moritz said:

“This year’s data suggests a high degree of CEO uncertainty ahead, but CEOs are taking action. They are transforming their business models, investing in technology and their people, and managing the risks and opportunities presented by the climate transition. If businesses are to thrive over the short and long-term, build trust, and deliver sustained and long-term value, they must accelerate the pace of reinvention.”

Click here to access the survey.

Renewable energy capacity experienced its strongest growth in decades in 2023, with a 510 GW increase in global capacity additions in the year, up by 50% over 2022, with China emerging as a key driver of the global growth, according to a new report released today by the International Energy Agency’s (IEA).

With the dramatic increase seen over the past year, the “Renewables 2023” report found that the world is now on track to grow renewables capacity by 2.5x by 2030, putting the global goal established at the COP28 climate conference to triple renewable energy capacity by the end of the decade within reach, and to overtake coal as the largest source of global electricity generation by early 2025.

IEA Executive Director Fatih Birol, said:

“The new IEA report shows that under current policies and market conditions, global renewable capacity is already on course to increase by two-and-a-half times by 2030. It’s not enough yet to reach the COP28 goal of tripling renewables, but we’re moving closer – and governments have the tools needed to close the gap.”

China was a key driver of the global renewables growth, according to the report, with the country adding as much solar PV capacity over the past year as that commissioned in the entire world in 2022, while also growing its wind power additions by nearly two thirds. China also accounts for nearly 90% of the IEA’s upward renewables forecast revision, with solar PV capacity representing the bulk of the increase.

Other regions that reached record renewable energy capacity increases included the U.S., EU and Brazil, each of which are also expected to see solar PV and wind deployment more than double from 2023-2028 compared to the prior 5-year period.

By type, solar PV accounted for the significant majority – around three quarters – of the capacity additions worldwide in 2023, while going forward, declining costs for new solar PV and onshore wind installations are seen as increasing their competitiveness, with almost all wind and solar PV capacity deployed expected to provide lower generation costs than coal and natural gas alternatives for new plants by 2028, according to the IEA forecast. The IEA’s outlook for offshore wind through 2028, by contrast, was revised down by 15% in areas outside of China, driven by higher investment costs that have led to the cancellation or delay of 15 GW of projects in 2023.

The report also highlighted the key challenges required to be addressed in order to reach the COP28 goal of tripling renewables capacity by 2030, including policy uncertainty and delayed policy responses to the new macroeconomic, insufficient investment in grid infrastructure which is holding back a faster expansion of renewables, administrative barriers and cumbersome permitting procedures, as well as insufficient financing in emerging and developing economies.

Birol said:

“There are still some big hurdles to overcome, including the difficult global macroeconomic environment. For me, the most important challenge for the international community is rapidly scaling up financing and deployment of renewables in most emerging and developing economies, many of which are being left behind in the new energy economy. Success in meeting the tripling goal will hinge on this.”

Click here to access the report.

Companies globally are making progress with their climate disclosures, both in terms of the number of businesses reporting on climate-related factors and the quality of the reporting, according to a new study released by global professional services firm EY, although the improvements are only “marginal,” and significant work remains to prepare for reporting against the new sustainability disclosure standards released by the IFRS Foundation’s International Sustainable Standards Board (ISSB).

For the report, EY’s fifth annual Global Climate Risk Barometer, EY analyzed the disclosures of more than 1,500 companies across 13 climate risk-exposed sectors and 51 countries.

Key aspects of disclosure examined in the report included “Coverage,” based on the number of Task Force on Climate-Related Financial Disclosures (TCFD) recommendations addressed by companies, and “Quality,” or the extent to which disclosure meets requirements of the 11 TCFD recommendations.

The report found a continued increase in the quantity of climate disclosure by companies, with the Coverage metric reaching 90% in this year’s survey, compared with 84% last year, and only 70% in 2021. Quality scores, on the other hand, continue to lag at 50%, while improving from 44% last year and 42% in 2021.

By sector, the report indicated that those with the greatest exposure to climate-related transition risk tended to post higher disclosure scores, both in terms of coverage and quality. The energy sector, for example, received the highest scores among for coverage (95%) and quality (55%), with other strong non-financial performers including the materials & buildings and mining sectors. Within the financial industries, the insurance sector scored the highest, with a coverage score of 93%, and quality reaching 55%.

For the first time, the report examined companies’ readiness for meeting the requirements of the IFRS Foundation’s climate reporting standard, IFRS S2. The IFRS Foundation’s ISSB released their inaugural general sustainability reporting standard (IFRS S1) and IFRS S2 in June 2023, and the new standards are expected to inform emerging disclosure requirement systems from many regulators globally, beginning as soon as next year.

Assessing company disclosures across the four main pillars of IFRS S2, which include governance, strategy, risk management, and metrics and targets, the reports assessment was decidedly mixed, indicating stronger scores in governance categories, with nearly 60% of companies disclosing on skills and competencies to oversee strategies and on how committees are set up to oversee target setting, but much lower in risk management, with only 3% disclosing “information pertaining to changes in process used to identify climate-related risks prior to the reporting period.” Strategy and metrics and targets was also mixed, with 65% of companies disclosing progress against previously set targets, and 54% disclosing on Scope 3 emissions categories, but only 5% disclosing on quantitative/qualitative information impacting financial planning, and 12% disclosing emissions details on legal entities.

The report also examined disclosures around transition planning, one of the key aspects of IFRS S2, finding that only around half (53%) of companies disclose a specific net zero strategy, transition plan or decarbonization strategy. More highly-exposed sectors again were found to be in the lead on this metric, with 60% of energy and mining companies and 58% of transportation companies disclosing transition plans. Lagging sectors included financial asset owners and managers at 39% and agriculture, food and forest products at 43%.

Other notable findings in the report included indications that companies are more focused on risks than opportunities in their climate reporting, with 77% of companies assessed having conducted analysis on risk compared to 68% on opportunities. The report also found that companies are still lagging on disclosing the links between climate impact and financial performance, with only 33% of companies referencing climate-related matters in their financial statements, and only 26% providing quantitative impacts of climate-related risks in financial statements.

Dr. Matthew Bell, EY Global Climate Change and Sustainability Services Leader, said:

“At a time when we should significantly ramp up our transitioning to a net-zero economy if we are to meet our climate commitments, this year’s EY Global Climate Risk Barometer indicates that there is a concerning disconnect between the stated climate ambitions and the corporate actions to achieve them.

“Climate risk disclosure should not be viewed as a separate tick box exercise, but as an opportunity to inform wider commercial strategy and gain competitive advantage.”

Click here to access the report.

More than 4% of GDP could be lost annually due to the physical impact of climate change, if temperature increase exceeds 2°C, with developing nations significantly more exposed and less prepared, according to a new study released by S&P Global Ratings.

For the report, “Lost GDP: Potential Impacts Of Physical Climate Risks,” S&P Global examined a series of climate scenarios for projected greenhouse gas emissions and temperature changes, assessing the potential exposure of 137 countries to economic losses caused by the physical impacts of climate change, focused on seven specific climate hazards, ranging from extreme heat and flooding to wildfires and storms.

S&P Global noted that the report comes as natural disasters are already leading to greater economic impact, with statistics provided by Swiss Re revealing a 5% – 7% annual growth in annua insured losses from 1992 – 2022.

Under a “slow transition” scenario in which temperature increase is anticipated to reach 2.1°C by 2050, the report indicates that up to 4.4% of the world’s GDP could be lost annually,, absent adaptation measures, with the bulk of the impact – roughly 60% of the total – driven by water stress and extreme heat, which in combination could result in depleted water resources, increased energy demand, disruption to agricultural production, and a greater risk of wildfires.

The report found that developing regions would be substantially more heavily impacted by climate hazards, with lower income countries 4.4x more exposed to climate risks that their wealthier counterparts, and less prepared to address economic losses.

Under the slow transition scenario, the report found that South Asia has the greatest exposure to climate change, with approximately 12% of GDP at risk annually by 2050, followed by Sub-Saharan Africa, and the Middle East, and North Africa (MENA), each with 8% of GDP at risk, while GDP at risk in North America and Europe is under 2%.

The report also utilized a readiness assessment metric, measuring the ability of countries to avoid, respond to, and recover from physical climate risks, which found that North America and Europe, the least exposed to physical climate risk were also by far the most prepared, while Sub-Saharan Africa is the least prepared region to face losses from climate hazards, and lower income areas broadly scoring well below their higher income peers.

While noting the need to invest in climate adaptation to address these risks, the report also notes barriers to funding adaptation measures, with most adaptation finance provided in the form of debt instruments, while finance conditions are tightening, and may become worse in an environment of higher interest rates.

Click here to access the S&P Global Ratings report.

Corporate progress on sustainability initiatives, and on actions to address climate change in particular, is stalling amid economic and geopolitical turmoil, as the pace of emissions reductions slows and sustainability spending growth slowing, according to a new survey of Chief Sustainability Officers (CSOs) released by global professional services firm EY.

For its 2023 Sustainable Value Study, EY surveyed 520 CSOs and corporate sustainability leaders at companies with over $1 billion in revenue, across 10 industries and 23 countries in the Americas, Asia-Pacific and EMEIA.

The report indicated a sharp slowdown in climate achievements and commitments, with respondents reporting an average decline in greenhouse gas (GHG) emissions of 20%, down from 30% in a study last year, a decrease in the average number of actions organizations are taking relating to climate change to 4, from a prior average of 10, and an extension of deadlines for achieving corporate climate goals to a median year of 2050, compared to 2036.

The findings align with those of another recent EY survey of senior corporate finance leaders, which found that while sustainability remained as a top investment priority, it was also the most likely area to experience near-term budget cuts in the current inflationary and geopolitically unstable environment in order to meet short-term earnings goals.

Amy Brachio, EY Global Vice Chair of Sustainability, said:

“Amidst the backdrop of unprecedented geopolitical tensions, sustainability leaders are facing clear challenges with resource allocation, but we cannot afford collective efforts to slow when the stakes are so high.”

These results were reflected in the new CSO survey, with only 34% of respondents reporting that their organizations plan to increase spending this year to address climate change, compared to 61% last year.

The report also found a widening gap between those leading and lagging on climate action,  with 76% of “pacesetters,” or those assessed as leading across a series of climate-related metrics such as measurement, reporting, operations and supply chain, reporting plans to increase sustainability spend, compared to only 7% of those classified as “observers,” while only a small (6 percentage point) gap separated the two groups in the prior year. The study also identified far fewer “pacesetters,” at 7% this year compared to 32% in the prior year.

The slower pace of climate action found by the study despite indications from the respondents of significant benefits from delivering on their sustainability goals, with more than half reporting experiencing financial value exceeding their expectations from their climate initiatives, and nearly two thirds experiencing better than expected improvements in product and brand value.

Sustainability leaders appeared particularly upbeat about the benefits achieved from their climate initiatives, with 89% of pacesetters reporting capturing higher value than expected in customer value, 79% in employee value, and 79% in financial value.

According to Matt Bell, EY Global Climate Change and Sustainability Services Leader, the results of the survey also indicate a shift in focus from making climate commitments to delivering on them, with the early phases of “low hanging fruit” coming to an end. Bell said:

“CSOs are facing an inflection point. Most have made climate commitments and are now under pressure to meet them. So, it’s unsurprising that focus has moved from public declarations to implementation and delivery. We are entering a period where deep decarbonization gains are linked to large scale, cross sector, investment, data and transformation.”

As sustainability action stalls, sustainability professionals appear to be experiencing job dissatisfaction, according to the report, which found that only 17% of CSOs reported being “highly satisfied” in their roles, and 42% saying that they are not committed to staying with their current employer over the next year. The study assessed that only around one in five of respondents were equipped with the necessary resources and influence to effectively drive sustainability in their organizations. Of these “transformational CSOs,” satisfaction levels appeared much higher, with 78% reporting that they were committed to staying in their current roles.

Brachio added:

“Sustainability leaders have to play an increasingly strategic role in navigating both internal and external challenges of moving from climate ambition to climate action. Therefore, it is essential that they are not only empowered to drive sustainability initiatives but also have the operational mandate to integrate their plans into a wider business strategy. This entails that CEOs not only appoint CSOs with a deep understanding of their business models but also strongly endorse collaboration between the CSO and other members of the C-Suite.”

Click here to access the survey results.

Over half of companies are now disclosing at least some of their Scope 3 value chain emissions, up from around a third two years ago, according to a new survey released by Boston Consulting Group (BCG), although virtually no progress has been made on the proportion of companies comprehensively reporting across all emissions scopes, and fewer companies are on track with their emissions reduction ambitions relative to the prior year, the report found.

For the study, the CO2 AI + BCG Carbon Emissions Survey, BCG and enterprise sustainability management platform CO2 AI surveyed 1,850 executives with responsibility for emissions measurement, reporting, and reduction at organization with at least 1,000 employees and with revenues ranging from approximately $100 million to over $10 billion, across 18 major industries and 23 countries.

The report found that only 10% of companies surveyed comprehensively measure and report Scope 1, 2 and 3 emissions, marking no progress on this metric over the past year, and up only slightly from 9% in 2021.

Despite the lack of progress on full emissions reporting, however, the report did indicate signs of improvement, with 53% of respondents reporting that their carbon emissions reporting includes at least partial Scope 3 emissions, up from 44% in 2021, and from 34% in 2021. While Scope 3 emissions, which occur in value chain areas outside of companies’ direct control, such as supply chain or use of products, are typically the most difficult to measure and manage, they also make up the vast majority of most companies’ emissions impact, often accounting for more than 90% of emissions overall.

Similarly, an increasing number of companies reported that they have set reduction targets for their value chain emissions, with Scope 3 targets at 35% of companies, up from 29% last year and 23% in 2021.

While companies are increasingly setting targets, however, the report found that fewer are on track to meet their current goals, with only 14% reporting that they have realized more than 75% of their emissions reduction ambitions over the past 5 years, down from 17% last year. The survey examined the key obstacles to the achievement of companies’ emissions reduction goals, finding that macroeconomic conditions was most often cited as an “extremely significant” or “major” challenge, by 42% of executives, followed by capital constraints by 39%, and immature abatement technology by 35%.

The lack of progress on emissions reduction goals comes despite recognition of significant business benefits of decarbonization. More than half of respondents cited reputational value as a benefit of decarbonization, with other benefits reported including lower costs (50%), higher valuations (44%), higher revenues (41%) and the ability to attract the best talent (38%). 40% of respondents estimated annual financial benefits for meeting emissions reduction targets of at least $100 million.

Hubertus Meinecke, BCG’s Global Sustainability Leader and a coauthor of the study, said:

“There are encouraging signs of progress in measuring and reducing emissions, but it is crucial that businesses redouble their efforts. Doing so will not only help mitigate the impacts of climate change, but it will also deliver a boost to businesses’ bottom lines.”

The report also examined the top enablers allowing companies to achieve emissions reductions, with 39% of executives citing technology adoption as one of the most significant contributors to emissions reduction initiatives, with other key enablers including leadership buy-in (33%) and a sustainability-focused culture (32%). Many companies expect to use AI-powered technology for emissions management going forward, including 38% of executives expecting to use AI for baseline emissions management within the next 3 years, 36% for supply chain tracking, and 30% for emissions accounting and reporting.

Charlotte Degot, CEO and Founder of CO2 AI and a coauthor of the report, said:

“Businesses are increasingly acknowledging the transformative power of technologies and artificial intelligence in bridging the divide between their reduction ambitions and real, tangible impact. There is no time to lose in scaling these best practices.”

Click here to access the report.

More than three quarters of large companies globally have succeeded in cutting their operational emissions intensity, or the emissions per unit of revenue, since the implementation of the Paris Agreement in 2016, but less than a fifth are on track to achieve net zero emissions by 2050 – the goal required to meet the Agreement’s ambition to limit global warming to  1.5°C – according to a new study released by global professional services firm Accenture.

For the study, Destination Net Zero, Accenture examined the 2,000 largest public and private companies by revenue globally, analyzing their net zero commitments, decarbonization levers and track records of reducing operational Scope 1 and 2 greenhouse gas emissions.

The report found that the number of companies committing to net zero emissions continues to grow, although the pace of growth has slowed somewhat over the past year, with 37% of companies now having a commitment in place, relative to 34% last year, and up from only 27% in 2021. European companies are by far in the lead on this metric, with 61% having a net zero commitment in 2023, up sharply from 37% in 2021, while North American companies are lagging at 28% currently, unchanged year-over-year, and up from 23% in 2021.

The number of companies addressing their emissions footprint has grown significantly over the past few years, with 77% of those reporting emissions (around 70% of the overall sample) cutting their emissions intensity since 2016, nearly double the rate of those that reduced emissions intensity in the five years leading up to 2016, according to the report. Results were less encouraging when not adjusting for business growth, however, with only around half of companies having cut absolute operational emissions since 2016.

By industry, the utilities sector has seen the most significant emissions reductions since 2016, with an annual decline in Scope 1 and 2 emissions of 5%, and 68% of companies reducing emissions, while Software and Platforms companies on the other hand have seen emissions increase by 15% on average, with only 35% of companies reducing emissions.

Overall, the report found that only 18% were assessed to be on track to reach net zero by 2050. By region, 24% of European companies were on track for net zero by 2050, compared with 20% in North America, and only 13% in the rest of the world. 67% of European companies have reduced emissions since 2016, compared with 53% in North America, and 40% in the rest of the world.

While 70% of operational emissions come from the top 20% of emitters in each industry, according to the report, these companies lead on ambition, but to date are behind on action, with 42% of top emitters having set a net zero target, but only 31% having actually reduced emissions since 2016, well below the 50% of total companies with reduced emissions.

The report also revealed that the vast majority of companies are employing at least some decarbonization levers, with 82% implementing energy efficiency measures, 80% reducing waste, 79% switching to renewables, and 68% adopting circular principles. Of 20 decarbonization levers identified by Accenture, around 40% of companies were found to be adopting at least half, with 4% adopting 15 or more. Those found to be adopting 10 or more levers were much more likely to be reporting reduced emissions.

Jean-Marc Ollagnier, CEO of Accenture for Europe, Middle East and Africa, said:

“It’s promising to see an increase in public commitments to net zero targets again this year, but the adoption of key decarbonization measures is not uniform, with some companies still unable to master the basics. Reaching net zero is a unique opportunity for every organization to reinvent themselves and their value chains by aligning business growth with the net zero imperative, despite the many obstacles they must overcome. However, it is not just an enterprise challenge but also an ecosystem one, as there is a need to address the disconnect between supply and demand.”

Click here to access the Accenture report.

Investors are increasingly concerned about corporate greenwashing, with nearly all reporting that they believe corporate reporting on sustainability performance contains unsupported claims, according to a new survey by global professional services firm PwC, which also found that investors want more information on the cost of companies’ ESG commitments, and on the impact of their portfolio companies on the environment and society.

For the report, PwC’s Global Investor Survey 2023, PwC surveyed 345 investors and analysts across 30 countries and territories, with 65% of respondents at organizations with total AUM of more than $1 billion.

The survey found a broad consensus among investors on the importance of ESG and sustainability issues, with 70% agreeing that should embed ESG directly into their corporate strategy, and 75% saying that companies’ management of sustainability-related risks and opportunities is an important factor in decision-making. The report noted, however, that these levels were below those of a prior 2021 survey, despite the fact that fewer investors disagreed with these statements, with more investors instead being “neutral” on these issues.

Similarly, 69% of investors reported that they would increase their investments in companies that successfully manage sustainability issues relevant to the business’s performance and prospects, and 67% would increase investment in companies that change their business conduct to have a beneficial impact on society or the environment.

While investors appear to continue to focus on sustainability issues in their decision-making, the survey indicated increasing concerns about greenwashing risk, with 94% reporting that they believe corporate reporting on sustainability performance contains unsupported claims, up from 87% in the prior survey, and including 79% who said the unsupported sustainability claims are present to a moderate or greater extent.

The report indicated that many investors are looking to emerging regulatory sustainability reporting regimes to address their greenwashing concerns, with 57% saying companies meeting regulations and standards including CSRD, the SEC climate disclosure rule or ISSB standards would meet their information needs for decision-making to a large or very large extent, and 85% reporting that reasonable assurance would give them confidence in sustainability reporting.

Nadja Picard, Global Reporting Leader, PwC Germany, said:

“We are seeing significant steps towards more consistent reporting from companies around climate change, however there is a need for improvement.”

The survey also examined areas in which investors were seeking sustainability-related information, with 76% reporting that it is important for companies to report on the cost of meeting their sustainability commitments, and 74% looking for reporting on the roadmap to meet those commitments.

Investors have also become more interested in information on the impact of companies on the environment and society, with 75% wanting reporting on these issues, up from only 60% last year.

The report also found that investors have been active in pursuing their sustainable investment agendas, with over half saying they have turned to incentives such as incorporating progress on meeting ESG targets into executive pay, 50% reporting having submitted ESG-related shareholder resolutions, and 42% saying that they have divested their stakes in companies that haven’t demonstrated sufficient action on sustainability issues.

James Chalmers, Global Assurance Leader, PwC UK, said:

“We are moving from a period of awareness raising around the importance of climate and technological change to a time where investors are increasingly asking specific and tough questions about how companies are addressing those issues in their strategy, how they assess risk and opportunity, and what is truly material for them. In this context, corporate reporting needs to continue to evolve so it provides reliable, consistent and comparable information investors – and other stakeholders – can rely on.”

Consumers globally are willing to pay more for products with a lower environmental impact, as they express increasing concern over climate change and environmental sustainability, yet many still find sustainable consumption too expensive, and focus on different aspects of product sustainability than the companies producing the products, according to a new study released by global management consultancy Bain & Company.

For the study, Bain surveyed more than 23,000 consumers globally about a broad set of sustainability issues, including their concerns and buying behaviors, and also conducted conjoint analysis and ethnographic research, speaking directly to hundreds of consumers.

The survey revealed a broad and growing interest among consumers on sustainability issues, with nearly two-thirds (64%) of respondents reporting being “very or extremely” concerned about environmental sustainability, and 60% saying that their climate change concerns have intensified over the past two years.

While the majority of consumers in almost every market expressed concerns about environmental sustainability, those in fast growing markets appeared to have higher concern levels than those in developed countries, with 85% in India, 81% in Brazil and 73% in China, for example, reporting being very or extremely concerned, compared with 53% in the U.S., 54% in Germany and 56% in the UK.

The report appeared to dispel prevalent perceptions of differing levels of sustainability perceptions across demographic groups, finding, for example, that concerns about climate change did not vary significantly by age, with 68% of Boomers and 69% of Gen X respondents reporting being very or extremely concerned about the environment, compared with 74% of Millennials and 72% of Gen Z. Additionally, while 85% of self-described U.S. Liberals reported high climate change concerns, compared to only 39% of Conservatives, the latter group reported relatively higher levels of concern than their Liberal counterparts on environmental issues such as water, biodiversity loss and air pollution.

As environmental concerns grow, the report found significant interest among consumers to purchase sustainable products, with 50% reporting that sustainability was one of their top 4 purchase criteria, and respondents globally reporting that they would pay a 12% premium on average for minimized environmental impact. The report indicated that this willingness broadly mirrored concern levels, with consumers in faster growing markets accepting larger premiums, such as 20% in India, 16% in Brazil and 15% in China, compared with 11% in the U.S., 9% in Germany, and 8% in the UK.

Despite the willingness to pay more for sustainable products, however, the report found a significant gap in the abilities of consumers to do so, with companies on average charging 28% premiums for more sustainable products, well above the level consumers were willing to pay, leading almost half of developed market consumers and over a third of those in fast-growing markets to report that living sustainability is too expensive.

An additional factor impacting consumers’ ability to purchase more sustainable products revealed by the report was an inability to discern which products are more sustainable, despite relying on labels and certifications. When asked to determine which of two products generated higher carbon emissions, for example, the survey found, that the consumers could not make the correct choice approximately 75% of the time.

The study also indicated a disconnect between definitions and criteria for sustainability between consumers and businesses, finding that while most companies focus on how products are made, such as the sustainability of ingredients and production methods, around half of consumers focus instead how the products are used in their sustainability considerations, looking at aspects such as product reusability, durability, and waste minimization.

Click here to access the study.

Despite progress on scaling up low carbon energy production and industrial technologies, significant barriers remain in the way of the global ambition to achieve net zero emissions by 2050 and to limit temperature rise 1.5°C, with current initiatives insufficient to meet these climate goals, according to a new report by global professional services firm KPMG.

Key challenges holding back progress include increased levels of public debt, the relatively high cost of clean energy alternative technologies, and growing energy needs, as well as conflicting environmental needs emerging as a result of the energy transition.

The study, KPMG’s Net Zero Readiness Report 2023, was based on conversations with national climate change experts in 24 markets and across 6 economic sectors, examining the steps taken by each to reduce greenhouse gas emissions, and their preparedness to achieve net zero by 2050.

One of the key barriers to achieving national climate goals highlighted in the report is the high level of public debt across many economies, following increased spending by governments for initiatives including COVID relief and subsidized energy spending following the Russian invasion of Ukraine, as well as higher interest rates, constraining the abilities of governments to pursue green investments. Noting the impact on governments of the increase in global public debt to 92% of GDP in 2022 from 84% in 2019, and rising interest rates, Yael Selfin, Chief Economist, KPMG in the UK, said “it leaves less room for them to spend on meeting net zero targets.”

The report also identified the high costs of decarbonization as a challenge that needs to be addressed, highlighting issues such as emerging opposition to plans in countries including the UK and Germany to require homeowners to move away from fossil fuel-powered heating to low emissions alternatives such as heat pumps causing these mandates to be eased or delayed. On the industrial side, while noting the early success of some sectors, such as the automotive sector to scale up adoption of electric vehicles, the report also high cost and low availability of green fuels holding back the pace of adoption in high emitting sectors such as aviation and shipping.   

On the energy front, while the report notes a major shift in investment trends over the past few years, with global spending on the development of low carbon energy now significantly higher than that for fossil fuels, it also finds that this has not yet had much impact on the overall mix of energy sources. The report highlights a variety of challenges holding back a shift in the energy mix, including the increasing energy needs of fast-growing countries such as China and India leading them to add both renewable and fossil fuel generation, and the need to significantly re-engineer electricity grid infrastructure to handle more widely distributed energy generation sources and more the intermittent production typical of renewable energy.

One of the challenges noted by the report was the emergence of “green on green” conflicts, or clashes between the establishment of new low carbon energy projects and the local environment, such as the impact of new generation and infrastructure projects on local wildlife, and biodiversity, which has led to local opposition to the projects in some areas.

Mike Hayes, Climate Change and Decarbonization Leader and Global Head of Renewable Energy at KPMG International, said:

“Governments, businesses, and society should continue to pursue action to address climate change. Further divisions between local communities and global interests are to be expected, but if we are to truly make meaningful strides towards net zero, at the necessary pace, while ensuring a stable energy supply, much greater focus is required. This includes in areas such as the policy environment (both carrot and stick), technical innovation, and educating society about the transformational changes that are required in our consumption and investment behaviors.”

Click here to access the report.