Seventy percent of global executives plan to increase spending on climate change over the next two years, according to a new survey by Ernst & Young.
Across 16 countries, three hundred executives participated in the survey representing companies with at
least US$1 billion in annual revenue.
Despite challenging economic conditions and regulatory uncertainty, the executives believe that the climate change agenda will significantly impact business performance and strategy over the next few years.
The survey found that corporate executives expect to make significant investments to deliver both cost savings and revenue generation opportunities relating to climate change. Of the 70% increasing spending, nearly half plan to spend between 0.5% to more than 5% of their revenue on climate change initiatives. For a US$1b company, this represents an anticipated spend of US$5 million to US$50 million annually.
Energy efficiency is at the top of the list as 82% of respondents
plan to invest in this space over the next 12 months. About half of the
respondents confirm new ventures, such as spin-offs or start-up
businesses, as an area for focus. Additionally, 65% of executives intend
to focus investments on new products and services.
94% of
respondents see national policies as important or very important in
shaping their climate change strategies, although 81% recognize the
importance of global or international policies.
"Corporate leaders are not letting the lack of global standards and regulations slow their climate change investments," Steve Starbuck, Americas Climate Change and Sustainability Services
Leader at Ernst & Young, said. "Other market drivers, such as equity analysts’ growing interest in climate change performance, are prompting a further need to act and be more transparent.”
Consumers and equity analysts are two of the factors driving this investment trend. Corporate climate change activities are being driven by evolving customer demands according to 89% of survey respondents. Some sectors, including automotive, consumer products, and technology, unanimously agree that changing customer preferences have created significant drivers for action and innovation.
Meanwhile, equity analysts are increasingly linking the business response to climate change and company valuations. Over 40% of the senior executives surveyed believe that equity analysts currently include climate change-related factors in company valuations.
Other key findings from the survey include:
- In the developing economies of China and India, executives rank product development as the top challenge to achieving their goals, 97% and 72% respectively. Respondents in Australia, Canada, US, Japan, Germany and France indicate that regulatory and compliance issues present primary challenges in the next two years.
- Approximately 66% of respondents are discussing climate change programs with their suppliers and 36% of respondents are already working directly with these stakeholders to decrease the carbon in their supply chains.
- Transparent reporting is gaining momentum, as 64% of respondents report greenhouse gas data in an annual corporate social responsibility or sustainability report. Of the organizations that say they report, 62% verify their data through an independent, third-party.
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