Businesses are under increasing pressure to adopt sustainability measures and those that do show more confidence in their future, a study has found.
EY has published the findings of its fifth Long-Term Value and Corporate Governance Survey, which shows firms that made sustainability part of their core strategies are 40% more confident in their business outlook over the next year. Researchers found that 91% of the companies surveyed reported pressure from investors to increase sustainability efforts, and 78% reported the same of activists.
Respondents pointed to concerns about reputational damage with 39% saying they suffered bad press for inadequate sustainability efforts. That figure dropped to just 6% for firms with fully integrated sustainability strategies.
EY found what it called a significant gap between sustainability strategy and business strategy, with sustainability "siloed" and boards and management not seeing eye to eye. A majority of board members (82%) say their sustainability strategies are completely standalone, whereas senior leaders are more likely to think that sustainability is embedded in the overall business.
Authors identified a group they dubbed "sustainability integrators" who have embedded sustainability into their businesses, which subsequently boosted brand reputation and improved recruitment and retention. But only 27% of businesses fall into this category, with the majority of firms (55%) separating sustainability strategy or not having one at all.
And the majority of those surveyed (57%) said that if they had to make cost savings, sustainability initiatives are more likely to be abandoned than business initiatives. For 39%, sustainable has always ranked lower than commercial objectives in their priorities. Those readings varied again between boards and senior leaders with 81% of boards suggesting sustainability initiatives would be first to be cut, compared with just 33% of senior leaders.
Julie Linn Teigland, EY EMEIA area managing partner and EY global vice chair – alliances and ecosystems, said: "By embedding sustainability at the heart of decision-making and leveraging the latest technologies to drive change, businesses not only bolster resilience but also position themselves for success. The call to action is clear: sustainability must be central to business strategies today and into the future.”
EY has offered a set of recommendations for firms to become sustainably integrated, including: ensuring board and senior leadership are aligned; stop thinking sustainability is someone else's job; make sure every business function understands the importance of sustainability; getting the right finance in place, and invest in relevant technology programmes.
Andrew Hobbs, EY EMEIA public policy leader, said: "Companies must act now to embed sustainability or risk being left behind. Embracing sustainability means understanding its tangible commercial benefits while also putting serious investment plans in place. Those who take the boldest steps will not only boost resilience but also gain the confidence to succeed.”
