Key Takeaways
- Value Creation: Companies believe sustainability creates shareholder value.
- Strategic Integration: Sustainability is becoming part of core business strategies.
- Investment Challenges: High investment costs are a significant barrier.
- Climate Impact: Climate change is a key driver for sustainability efforts.
Why Sustainability Matters
Many companies around the world are now focusing on sustainability goals, primarily because they believe it will create value for their shareholders. This insight comes from a new study by Morgan Stanley’s Institute for Sustainable Investing.
Other top reasons for prioritizing sustainability include:
- Compliance with government regulations
- A sense of moral responsibility
Interestingly, only 1% of the executives surveyed said sustainability was not important to their operations.
Merging Business and Sustainability
Jessica Alsford, the Chief Sustainability Officer at Morgan Stanley, shared some key insights from the study. She noted, “Sustainability strategies and core business strategies are converging. Companies increasingly see sustainability factors as integral to the company’s long-term value creation.”
Most companies now view sustainability efforts as essential for supporting business objectives. Only 26% of executives felt pressure from NGOs, activists, or media to make sustainability pledges.
Integrating Sustainability into Business Decisions
A significant number of companies (55%) are incorporating sustainability criteria into their key business decisions. This includes areas such as:
- Capital expenditures
- Research and development
- New product launches
- Mergers and acquisitions
Challenges in Implementing Sustainability Strategies
Despite the growing focus on sustainability, companies face several challenges. The biggest hurdle is the high level of investment required. About 70% of respondents said the needed investment is a significant barrier.
Melissa James, head of the Global Capital Markets ESG Center of Excellence, highlighted this issue, stating, “Sustainability as an investment theme continues to evolve towards more nuance and rigor as investors must confront competing priorities.”
The Impact of Climate Change
Climate change is a major factor driving companies to enhance their sustainability efforts. Here are some key points:
- 23% of respondents already see an impact from climate change on their business models.
- This concern is on par with traditional business risks like supply chain instability and geopolitical conflict.
- When considering medium and long-term risks, 92% expect climate change to impact their business model by 2050.
Looking Ahead
While there are challenges in developing expertise and financing models, corporate leaders view sustainable business practices as crucial for creating value and reducing risk.
Sustainability is no longer just a buzzword but a vital component of business strategy. As we move towards future deadlines for climate commitments, the focus on financing clean technology and facilitating the energy transition will only grow stronger.
