Do CEOs care about the climate?
January 22, 2015
We published our annual global CEO survey earlier this week to coincide with the opening of the World Economic Forum in Davos. The theme of our survey was how to create value in a rapidly changing world whether it’s about new customers or markets or the transformation of technology. Climate change barely registered on the list of risks that CEOs said they worried about, prompting Jo Cofino at the Guardian to ask whether CEOs are really serious about the issue.
Evidence of business engagement on climate change is mixed. Hundreds of business leaders attended the climate summit in New York in September last year. Many made commitments to tackle deforestation, raise climate finance and support carbon pricing. For the climate team in PwC, our clients are, by definition, committed to the issue. Climate change is also one of our five global ‘megatrends’ that we believe will be fundamentally disruptive in the next decade.
The WEF Global Risks Report, the Cambridge Corporate Leaders Group and our work with CDP (Carbon Disclosure Project) has shown how engaged companies are in thinking about and managing climate risk. Of course this varies by sector, size and geography. To make some sweeping generalisations: FTSE100 companies are generally more engaged than FTSE250 ones; and European companies, facing climate regulation, are more engaged than those in emerging markets.
But there is a distinction between the level of engagement on climate change by a company and by its boss. When asked about risks, our survey showed that CEOs understandably prioritise short-term issues such as government regulation, rising taxes and the response to national deficits. CEOs are also increasingly concerned about cyber security, the speed of technological change, terrorism, the oil price, changes in customer behaviour and the availability of key skills.
It is rare that climate change features in the top three risks, perhaps because CEOs put it in the long-term bucket. There are only a few CEOs who are consistently vocal about climate change and these are typically limited to the carbon light sectors in consumer goods or retail.
CEOs from heavy industry, energy and big power companies are generally pretty quiet on the issue, suggesting a degree of defensiveness. The steel sector raised its profile last October in advance of the EU’s decision on climate and energy policy to 2030. In a full page advert in the FT, CEOs from all the major steel companies raised concerns about their competitiveness and suggested that EU climate policy would cost them a whopping €70-100bn.
This might be about to change. We expect the UN climate negotiations to conclude in Paris in December this year with a global agreement. This will comprise of national action plans that are likely to shift climate change from being a long-term issue for business to a short-term one – affecting energy use, industry, deforestation and product standards.
Paul Polman and Lord John Browne are obvious examples of business leaders who have shaped the way their company, their sector and many others think about sustainability and climate change. When a CEO makes a bold pledge on climate change, you can be fairly confident that their company will take action. At the very least, it enables the environment manager to work with the operations director and make change happen. It also endorses efforts by governments to tackle the issue, so more engagement by CEOs in the lead up to the Paris Summit could support a more ambitious outcome. But, as our 2015 CEO Survey suggests, there is, for many business leaders, a way to go.