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Jun 14, 2024

Most CEOs still focused on decarbonization but taking long-term view, EY survey finds

A quarter of business leaders say they have deprioritized sustainability issues

While some companies have dialed back their ESG goals, CEOs as a whole continue to see sustainability as a growing area of importance, according to a recent survey. 

Short-term priorities have shifted, however, with investment in technology viewed as more critical than decarbonization efforts in the coming months. 

In a poll of 1,200 executives, more than half (54 percent) say sustainability is more of a priority now than it was a year ago, reports the quarterly CEO Outlook Pulse survey from EY.

Business leaders based in the Americas are most likely to say they have upped their focus on sustainability, with 62 percent selecting this option, compared with 51 percent in Europe and 49 percent in Asia-Pacific. 

But some CEOs have deprioritized environmental and social issues. On a global basis, 18 percent say they have done this due to challenging economic or financial circumstances, while 5 percent point to changing stakeholder concerns. 

One vs three-year outlook

When asked about their top strategic priorities over the next three years, the highest proportion of CEOs mention decarbonizing their business and achieving net-zero (selected by 43 percent), followed by protecting and enhancing revenue (41 percent) and investing in technology, including AI, to improve growth and productivity (34 percent).

The results switch around, though, when the timescale is reduced to just one year. Over the next 12 months, the top priorities are investing in technology (47 percent), enhancing data management & cyber-security (45 percent) and managing end-to-end costs (38 percent). Lowering carbon emissions comes sixth, cited by just 16 percent. 

‘A misalignment in priorities between short-term financial returns… [and] achieving sustainability targets more swiftly may be shortsighted,’ comments Andrea Guerzoni, EY Global vice chair for strategy and transactions, in a statement. 

‘Although it’s reassuring to see that CEOs remain positive about their business outlook, with many remaining committed to accelerating or delivering on their decarbonization targets, the fact that nearly one in four CEOs are moving sustainability down their business agenda is disappointing for those who look to companies to set the tone of this topic.’

The research also polled the views of institutional investors and compared their opinions with those of CEOs. The results show a high level of conformity about sustainability. For example, 74 percent of executives say their balance sheets face risks from stranded assets or impairments related to ESG factors, with 67 percent of investors believing the same about their portfolio companies. 

Similarly, 75 percent of CEOs and 70 percent of institutions agree with the statement that technology and AI should play a key role in meeting the sustainability challenges facing issuers. 

Notably, however, investors do not place decarbonization among their top three priorities for portfolio companies over the next three years. Instead, they opt for protecting and growing revenues, digital innovation & technology infrastructure and cost optimization. 

'From commitment to impact'

At Bayer, the German pharmaceutical and biotech company, the focus remains firmly on the company’s ‘mature’ set of sustainability targets, says Dr Jan Henning Sohlmann, senior manager for ESG investor engagement.

‘By disclosing progress annually, in many cases against a 2019 baseline, we are well underway to advance from commitment to real impact,’ he says. ‘At the same time, sustainability is an integral part of our strategy – in the health space as well as in agriculture – and a business driver, especially if innovation and new business models help to address environmental and social challenges. 

‘Against this backdrop, Bayer stays steadfast in its commitment to sustainability, even while the company faces additional challenges. Progress is not [taken] for granted but requires continuous major efforts.’ 
 
Sohlmann says Bayer is maintaining a high level of ESG engagement to take its message to the investment community and other stakeholders. 

‘We keep on engaging actively on ESG matters and try to leverage the multitude of available tools, from bilateral conversations with investor engagement groups like CA100+ and others to investor conferences,’ he says. 

‘We also give regular updates on sustainability-related webinars – for example, our next overarching group-level webinar on June 19 – or topic-specific sessions, such as our crop science webinar in October 2023.’

He adds that sustainability reporting has expanded to increase transparency in new areas, including genetically modified crops and political advocacy.