Businesses report sustainability delivers value in many ways, but hurdles remain
Business leaders report sustainability engagement is delivering financial value across M&A, customer engagement, and investor relations and they expect that to increase in the next three to five years. However, leaders also report their companies are taking diverging approaches with some leading, most keeping pace, and others focusing solely on compliance, according to a new survey from KPMG LLP, the U.S. audit, tax, and advisory firm.
Behind this effort to connect sustainability to financial value, leaders report that they are feeling the most pressure to be transparent about their sustainability strategies from their supply chain stakeholders in addition to mounting pressure from investors, customers, and government regulators. And while more than half are at least somewhat confident in meeting U.S. reporting requirements, internal barriers to strategy execution remain.
These results underscore that sustainability provides businesses with a clear opportunity to differentiate themselves and gain a competitive edge,” said KPMG U.S. Sustainability Leader Rob Fisher. “We found businesses see many levers by which sustainability can drive financial value, but that also drives complexity for organizing a cohesive, well-understood strategy that can overcome some very real challenges businesses are facing today.
Rob Fisher
U.S. Sustainability Leader
“While business leaders continue to report significant demands from customers, talent, regulators, and investors to engage on sustainability, engagement varies as businesses try to balance short- and long-term pressures and other competing priorities, creating a real opportunity for differentiation,” said Fisher.
The 2022 KPMG CEO Outlook found that despite 70% of U.S. CEOs indicating that sustainability had made a positive impact on financial performance, 59% indicated they were pausing or reconsidering their organization’s sustainability efforts in light of economic uncertainty. However, the KPMG study released today found that 55% of business leaders ultimately scaled up their sustainability efforts within their organizations this year, despite economic uncertainty, while 26% scaled back.
This latest survey further underscored the importance of sustainability to M&A efficacy with 41% believing it has significant financial value today. This echoes KPMG’s recent sustainability Due Diligence Survey, which found that material findings from sustainability due diligence led to deal cancellations and price reductions, with 59% of the corporate investors indicating that a deal of theirs had been canceled due to a material sustainability finding.
Many of the risks cited in this survey can become self-reinforcing posing a near-term risk with longer-term consequences. For example, the top barriers cited to achieving one’s sustainability strategy include distraction due to other more pressing business matters (40%), failure to attract/retain top talent (40%), and a perception of falling behind competitors (39%).
“Sustainability’s wide-ranging impacts and levers make it an incredibly unique coordination challenge for leaders,” added Fisher. “The risk of falling behind can compound, turning today’s headache into a long-term struggle as competitors pull away. The upcoming reporting requirements should ignite urgency to align one’s reporting with strategy today.”
KPMG U.S. Sustainability and Financial Value Survey
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