pwc ceo survey

Leadership in a changing climate

PwC CEO Pulse Poll of leaders on climate change

Embargoed to 0001 CET 4 September 2015

PricewaterhouseCoopers LLP, 1 Embankment Place. London, WC2N 6RH T: +44 (0)20 7 583 5000, F: +44 (0)20 7 822 4652, www.pwc.co.uk


Introduction

Every CEO wants to be remembered for a long-term vision that shapes the future of their company. Yet

the pressure to deliver short-term and largely financial success all too often gets in the way of creating

a lasting legacy.

There’s no clearer example of this than the way CEOs have

handled the issue of climate change. Many global

companies acknowledge the reality of climate change and

that it will impact their business. Yet, aside from a few very

vocal advocates, CEOs have, up until now, tended to look at

climate change through the short-term, tactical lens of

rising energy costs and making energy efficiency

improvements.

As climate change starts to affect access to raw materials, the reliability and security of global supply

chains, and even the type of products and services consumers demand CEOs must also take a strategic

view – one that looks to the short, mid and long-term, to identify both the risks and opportunities for

their business.

The upcoming UN Climate Summit in Paris (COP21) in December appears set to increase both risks

and opportunities for global companies. So where do CEOs stand on climate change and how can they

provide leadership now in order to deliver a lasting legacy?

PwC’s most recent Annual Global CEO Survey reported that 61% of CEOS saying they see more

opportunities for growth today than there were three years ago. And in our 17th Annual Global CEO

Survey released in 2014, when we asked specifically about megatrends, 46% of CEOs agreed that

resource scarcity and climate change was set to transform their business.

In this latest pulse, we asked CEOs from all over the world to focus on growth in the context of climate

change. Are they weighing up the risks but also considering the opportunities for growth from climate

change? And are they responding by building strategies for short-term and long-term business

success?

Energy cost concerns and the connection to regulation

It might seem counterintuitive that CEOs should be concerned about the effect climate change will

have on energy costs at a time when fossil fuel prices are low and supplies are abundant. Nevertheless

61% said that a rise in energy prices was the main threat posed to their company by climate change and

over half (56%) highlighted the risk posed by new government climate change regulation. Of those it

was the biggest companies (over $1bn turnover) that expressed the most concern over regulation.

This may be short-term analysis on their part as a global climate deal that aims to limit emissions to

meet the 2oC goal - or even a 3-4oC outcome - would inevitably lead to regulation that would see the

cost of energy rise in the short term.

Dig a little deeper though and CEOs are also concerned about strategic issues such as the risk posed to

their global supply chains by climate change (51%), and securing access to raw materials (49%). So

Every CEO wants to be

remembered for a

long-term vision that

shapes the future of

their company.

http://pwc.blogs.com/sustainability/2015/02/ceos-wade-into-climate-debate.html

http://pwc.blogs.com/sustainability/2015/02/ceos-wade-into-climate-debate.html

http://www.pwc.co.uk/sustainability-climate-change/paris-2015/index.jhtml

Leadership in changing climate


while a broader base of CEOs see climate change through the lens of greater regulation and higher fuel

bills, a smaller, leading, group is emerging that also view climate change from a strategic perspective.

They‘re concerned with their whole value chain, from the supply of raw materials, to production and to

the end customer.

Regionally, CEOs in Western Europe and Asia Pacific expressed the most concern about new

government regulation (59% and 58%). Asian and Latin American CEOs were more concerned about

supply chain disruption (58% and 62%) than their North American counterparts - possibly as they’re

already feeling some of the effects first hand. When it comes to industry sectors, a higher proportion of

financial services CEOs don’t see climate change as a risk to their business models compared to other

sectors, which could highlight a disconnect with the sectors they finance.

Laudable motives but missing the opportunities

Given their concerns over governmental regulation and the

impact of potential higher energy prices you might think

that CEOs would cite hard-headed business thinking when

asked what motivates them personally to take action on

climate change.

Instead, more than 80% told us that what motivated them personally to direct their business to take

action on climate change was a desire to protect the interests of future generations – a natural and

personal response. But does this sentiment result in cold, hard business decisions on climate action?

In the context of an ambitious climate deal, CEOs will need to align their desire to do right for future

generations with formulating strategies that will make their own business more resilient and adaptable

to succeed in a climate-change aware economy.

Does wanting to protect the

interest of future generations

result in cold hard business

action?



Our survey shows increasing evidence that an emerging

group of leading CEOs do understand the business case for

being proactive. Three in five surveyed (63%) said they

were personally motivated by creating a reputational

advantage. Just over half identified improving shareholder

value as a motivator. They also realise success won’t be

achieved in isolation. 58% of CEOs said their companies

are partnering with suppliers to address climate change

risks and opportunities and the same percentage are doing

so with business partners. And 55% said they were

collaborating with consumers on these issues.

Even greater collaboration would help. Less than a quarter of CEOs said their companies were

partnering with competitors and just 27% were reaching out to investors. The former is perhaps

understandable though, in broader areas of sustainability, pre-competitive collaboration within

industry sectors such as apparel, beef and forestry have been shown to accelerate smart thinking and

action. The lack of dialogue with investors suggests that even the more forward-thinking CEOs are only

just starting to identify how climate change will impact their company’s value and profits.

Overall, the leading CEOs realise that there are crucial business reasons for integrating climate change

strategies into their planning - from supply chain to marketplace, both from a revenue growth and risk

management perspective - and are taking action to do so. Making these benefits clear and measurable,

and communicating them widely, will be important to build deeper confidence in the business

community, with government and with the public.

An emerging group of CEOS are proactive

about integrating climate change

strategies into their business

http://www.greenbiz.com/blog/2014/01/27/state-green-business-collaboration-becomes-accelerator



Smarter sustainable thinking = smarter products and smarter operations

Consumers are starting to understand that more

sustainable products no longer means compromising on

quality or style. The automobile industry, with the arrival of

electric vehicle company Tesla, and innovation by

traditional carmakers offers a high profile example of this

shift in perception.

The domestic energy sector, where improvements in solar

power capacity are starting to reshape the relationship

between consumers and suppliers, is another - although

myths about the cost and reliability of renewables, access to

finance in some markets and inconsistent regulation

haven’t helped.

When we asked CEOs what actions they’d taken in response to climate change risks, three quarters

(75%) told us their company had developed more sustainable products and services. Western

European and Latin American companies were most active in this area; those in Asia Pacific and North

America less so. Over half (54%) were making strategic investments to take advantage of green growth

opportunities.

When you take into account that 61% of CEOs are also changing how they manage climate change

related business risks and 61% on how they take pollution levels into consideration in operational

planning, it’s clear that many companies are taking active steps to become more sustainable

businesses. They are doing so even if these actions are not yet being evaluated as a joined up corporate

strategy or translating into tangible revenue growth.

Consumers are

starting to

understand that more

sustainable products

no longer means

compromising on

quality or style.



Get the executive board on board

It’s clear from our findings that different divisions in CEOs’ companies are taking active steps to

mitigate risk and seek business opportunities from the challenges posed by climate change. However,

it’s also clear that many CEOs have yet to shape these different activities into a cohesive business

strategy and narrative to communicate internally and externally.

Over half of CEOs surveyed say their board discusses climate change and extreme weather risks only

when it impacts them (that was especially true of those from Western Europe). On the other hand, half

of CEOs said they table this at least once a year with the board.

The tendency to react to climate change rather than discuss it proactively isn’t so surprising, given that

extreme weather and climate change is often still viewed through the lens of crisis and risk

management, rather than strategic business planning.

The more CEOs come to view climate change and sustainability as an opportunity for growth as well as

a business risk (just 34% of CEOs told us that was case currently) the more likely it will command the

attention of the top table more frequently – particularly if targets and incentives for executives are also

aligned to delivering on climate change goals.

To Paris and beyond

The COP21 summit in Paris will generate headlines from now until early December.

But CEOs tell us the potential for a binding agreement isn’t the main driver for climate change action

in their sector. Taken literally that’s undoubtedly true – even a strong global agreement between

governments will seem removed from the world of day-to-day business.



And yet, a successful Paris accord will be the catalyst for major change on a national and regional level

– a form of trickle down climate legislation that will have ramifications for all of business.

77% of CEOs said a clear, consistent and long-term national government policy framework would drive

real climate change action in their sector. A COP21 agreement could give some governments the

license to regulate in areas not previously touched on.

It isn’t just the big stick of regulation that will drive change. 65% of CEOs say that improved access to

government funds for ‘green’ business will help. Yet an even bigger driver for CEOs is consumer clout.

80% of them said greater public awareness and engagement around climate change would spur their

sector into action, while 67% said demand for low carbon goods and services is important.

Essentially, CEOs are telling us they want to governments to lead (and remove market uncertainty)

with clear, consistent and long term regulation, and raise public awareness to gain the support of the

consumers. Business will follow with lower carbon, more climate resilient products, services and

solutions, and some of the finance.



Leadership in a changing climate

It’s clear to us at PwC that CEOs are on a “climate

leadership” journey. At the very start of the journey are the

sceptics - CEOs who, so far, either don’t believe that

climate change is happening or don’t see it as a business

issue.

Further down the path are what we call the ‘operationalists’

– a pragmatic group of CEOs whose focus is on reducing risk and costs through energy efficiency

strategies and operations - what well-managed company wouldn’t focus on reducing its fuel bills?

Further still along the climate leadership journey are what we see as the ‘opportunity seekers’ - CEOs

who are taking a more strategic view. They’ve identified the revenue opportunities to develop new

sustainable products and services, invest in new green growth opportunities, manage the risks of

climate change more closely, protect resource and raw material availability and cost through resource

efficiency and support biodiversity. Leading the journey are a small but growing number of CEO

‘advocates’ who are taking an activist stance with policy makers and making their voices heard

publically on the business reasons for tackling climate change.

As CEOs continue on their own climate change journey, they’ll need to reconcile their long-term vision

with their needs for short-term success. Ultimately, by replicating the focus and drive that has

delivered results within three and five year timelines, and aligning it with both tactical and strategic

climate change action, CEOs can drive sustainable growth that’s good for the planet and for their

companies. That would be a legacy all CEOs could be proud of.

It’s clear to us at PwC

that CEOs are on a

“climate leadership”

journey

EIGHT STEPS TO CLIMATE LEADERSHIP

1. Identify the business case for climate change action.

2. Put in place a strategy to manage the risks and opportunities in both the short- and long-

term

3. Go beyond direct operational impacts and consider the implications from supply chain to

customer

4. See regulation as an opportunity not just as cost and risk

5. Take the discussion to the board on a regular basis

6. Consider partnering with others, speak to suppliers and customers

7. Consider a climate change strategy as a key competitive advantage

8. Set ambitious targets, hold people accountable, and incentivise success



Media information:

About PwC Sustainability & Climate Change team

PwC’s sustainability and climate change advisory team was established in 2007, and combines 800 experts globally, with over 100 in the UK. Specialists work with public and private sector clients focusing on emerging issues of climate change policy, economics and development, sustainability/CSR strategy, supply chain, ethical sourcing / tracking, responsible investment, measurement, international development / sustainable development goals, reporting and assurance.

For more information see www.pwc.co.uk/sustainability. Follow the team’s latest views in our blog or @pwcclimateready.

For briefing/interviews please contact: Rowena Mearley, PwC Media Relations

T: +44 207 213 47 27/ + 44 7841 563 180

Email: [email protected].

@rowenamearley

http://www.pwc.co.uk/sustainability

http://pwc.blogs.com/sustainability/

mailto:[email protected]

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