A new survey by EY indicates a resurgence of interest in sustainability and climate issues among senior executives worldwide. Over half of CEOs surveyed reported that sustainability is now a higher priority compared to a year ago, with decarbonization emerging as the top long-term strategic priority.
The study, conducted through EY’s CEO Outlook Pulse Survey, involved 1,200 CEOs from large companies across 21 countries and 300 institutional investors. Results revealed that 54% of CEOs are giving increased priority to sustainability, while 23% have deprioritized it due to economic challenges.
In the Americas, 62% of CEOs reported higher prioritization of sustainability, while in Europe and Asia-Pacific, the figures stood at 51% and 49%, respectively. However, over a three-year horizon, decarbonization emerged as the most cited strategic priority, indicating a shift towards long-term sustainability goals.
Despite increased focus on sustainability, only 16% of CEOs identified decarbonization and achieving net zero as a top-three priority in the next 12 months. This contrasts with 47% prioritizing investment in technology and AI to drive growth and productivity.
The survey also revealed CEOs’ growing confidence in business prospects, with 60% feeling more optimistic about revenue growth and 65% more optimistic about profitability compared to the previous year. However, concerns were raised about potential budget cuts in sustainability initiatives to meet short-term earnings goals amidst inflationary and geopolitical uncertainties.
A misalignment in priorities between short-term financial returns at the expense of achieving sustainability targets more swiftly may be shortsighted. 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.
Andrea Guerzoni, EY Global Vice Chair – Strategy and Transactions
The survey results revealed contrasting views between CEOs and institutional investors on the priority of sustainability. While 54% of CEOs reported higher prioritization of sustainability, only 28% of investors agreed, with 35% indicating lower prioritization.
Despite this disparity, there were areas of agreement between CEOs and investors on sustainability issues. Both groups acknowledged concerns such as “greenhushing” to avoid accusations of greenwashing, the risk of stranded assets due to ESG factors, and consumer behaviors not aligned with sustainability goals. Additionally, both CEOs (75%) and investors (70%) agreed that technology and AI are key solutions to address sustainability challenges facing their companies.
However, a significant majority of CEOs (73%) believed that activist investors prioritize near-term financial results over long-term sustainability metrics, indicating a perceived misalignment in priorities between CEOs and investors.
