The UN Global Compact-Accenture CEO Study on Sustainability 2013 Global Insights with Special Focus: ASG (Austria, Switzerland and Germany) September 2013
Background and context: study participants The UN Global Compact-Accenture CEO Study is the largest CEO study to date on sustainability, representing the views of more than 1,000 CEOs worldwide Study participants One-to-one interviews 100 in-depth interviews including 77 CEOs, Chairs & Presidents 1,000 CEO survey respondents across 27 industries and 103 countries 128 64 61 56 48 38 37 33 33 27 26 23 16 Consumer Goods Infrastructure & TS Energy Industrial Equipment Electronics & High Tech Chemicals Metals & Mining Banking Health Communications Utilities Services Automotive Insurance 2
Executive summary The CEO Study examines CEO views on the past, present and future of sustainability CEOs are committed, but express a sense of frustrated ambition CEOs recognise the scale of the challenge: just 32% of CEOs believe that the global economy is on track to meet the demands of a growing population. And just 33% believe that business is doing enough to address global sustainability challenges. CEOs retain their belief that sustainability will be critical to success: 62% of CEOs expect sustainability to transform their industry within five years. And 76% believe that embedding sustainability into core business will drive revenue growth and new opportunities. CEOs see a plateau effect in sustainability, driven by market failure CEOs perceive a failure to align global markets with sustainability outcomes, and to incentivise and reward sustainability leaders. Many business leaders are struggling to quantify and communicate the value of sustainability initiatives to their companies, or make the business case for faster action. CEOs observe a plateau effect in their efforts to embed sustainability into their organisations. CEOs perceive difficulties in their relationship with investors and consumers, which may be hindering their ability to make progress on sustainability. 32% of CEOs believe the global economy is on track to meet the needs of a growing population 33% believe that business is doing enough to address sustainability challenges 3
Executive summary and on what it will take to harness sustainability as a transformative force in the economy CEOs call for government action to provide an enabling environment CEOs believe that only with greater government intervention at global, national and local levels can sustainability move from sporadic incremental advances to a collective and transformative impact. There is strong and vocal support among CEOs for governments to play a leading role in shaping the landscape for sustainability. 83% of CEOs see a need for governments to step up their efforts to provide an enabling environment for the private sector. Leading companies are not waiting for governments to act The advances of leading companies are demonstrating how business impact can be scaled beyond incremental advances and efficiency gains. Our analysis suggests that CEOs of companies that combine sustainability leadership with market-leading business performance approach sustainability in markedly different ways. These companies more readily accept that the world is not on track to meet the needs of a growing population, and that business is not doing enough; they are more committed to engaging consumers, communities, policymakers, investors and other stakeholders; and they see sustainability as an opportunity for innovation, growth and value creation. 38% of CEOs report that they can accurately quantify the value of their company s sustainability initiatives 83% believe that government policymaking and regulation will be critical to progress 4
Executive summary: CEOs in ASG Long-standing commitment and innovation, but a plateau effect in evidence CEOs see the plateau effect strongly in ASG Despite bright spots of innovation throughout ASG, the plateau effect is particularly in evidence: just 40% of CEOs believe that sustainability issues will be very important to success, below the 45% globally. Just 12% of ASG CEOs believe that the global economy is on track to meet the demands of a growing population versus a global average of 32%. CEOs still see sustainability transforming their industry This year, fully 70% of ASG CEOs believe that sustainability is a route to competitive advantage in their industry; 67% see sustainability primarily as an opportunity for growth and innovation. 40% believe that sustainability will transform their industry within five years. But challenges remain in making the business case for action Just 46% of ASG CEOs report that they could set out in detail their company s strategy for seizing opportunities presented by sustainability over the next five years. And only 17% report that they can accurately quantify the business value of their current sustainability initiatives. 40% of ASG CEOs expect sustainability to transform their industry within five years 40% of CEOs in ASG believe that sustainability will be very important to their future success 5
The UN Global Compact-Accenture CEO Study on Sustainability 2013 Insights from ASG
Study headlines: ASG Among 60 CEOs in ASG: believe the global economy is on track to meet the needs of a growing 12% population. 17% believe that business is doing enough to address sustainability challenges. report that they can accurately quantify the value of their company s 17% sustainability initiatives. 70% 73% believe that sustainability is a route to competitive advantage in their industry. believe that government policymaking and regulation will be critical to progress. Source: UN Global Compact-Accenture CEO Study 2013; survey data based on 60 responses in ASG 7
The UN Global Compact-Accenture CEO Study on Sustainability 2013 Data Insights Global and ASG
CEOs do not believe that global economy is on track Just 32% of CEOs believe that the global economy is on track to meet the demands of a growing population within global environmental and resource constraints. To what extent do you agree: the global economy is on track to meet the demands of a growing population within global environmental and resource constraints. Strongly disagree 10% Strongly agree 4% CEOs in ASG are more pessimistic than the global average on the pathway of the global economy. 28% Agree Strongly disagree 13% Strongly agree 3% 8% Agree Disagree 37% 23% Disagree 52% Neither agree nor disagree 21% Neither agree nor disagree 9
and do not believe that business is doing enough 33% of CEOs believe that business as a whole is doing enough to address global sustainability challenges To what extent do you agree: business as a whole is making sufficient efforts to address global sustainability challenges Strongly disagree 5% Strongly agree 3% CEOs in ASG are more critical than their global peers of the business contribution to addressing sustainability challenges Disagree 33% 30% Agree Strongly disagree Strongly agree 7% 3% 13% Agree Disagree 38% 38% Neither agree nor disagree 29% Neither agree nor disagree 10
Sustainability issues may be slipping down the agenda for CEOs In 2010, 54% of CEOs reported that sustainability would be very important to the future success of their business; in 2013, the figure drops to 45%. How important are sustainability issues to the future success of your business? Very important 45% 54% Just 40% of CEOs in ASG believe that sustainability will be very important to their future success Important 39% 48% Very important 40% Important 53% Neither important 6% not unimportant 5% Neither important not unimportant 7% Unimportant 1% 1% 2013 2010 Unimportant 0% 11
CEOs perception of the importance of sustainability varies by industry Business leaders in the banking and utilities sectors display universal recognition of the importance of sustainability to their companies How important are sustainability issues to the future success of your business? Important Very important Utilities Banking Infrastructure & Transportation Chemicals 39% 61% 39% 61% 50% 48% 47% 50% 100% 100% 98% 97% Metals & Mining 43% 54% 97% Communications 63% 33% 96% Automotive 52% 43% 95% Consumer Goods 41% 53% 94% Energy 35% 59% 94% Industrial Equipment Electronics & High Tech 54% 46% 42% 38% 92% 88% 12
In many industries, there is a marked decline in the proportion of CEOs who see sustainability as very important to success The chemicals and automotive sectors display a significant fall in the perceived importance of sustainability to success How important are sustainability issues to the future success of your business? Utilities Banking Energy Metals & Mining Consumer Goods Chemicals Infrastructure & Transportation Automotive Electronics & High Tech Industrial Equipment Communications 22% 31% 33% 38% 54% 53% 50% 48% 48% 43% 42% 45% 61% 61% 59% 62% 63% 62% 62% 2013 2010 68% 68% 68% 13
CEOs priorities are shifting and refocusing on issues close to home The impact of economic pressures may be evident in business leaders focus on shortterm issues closely tied to core business, as development issues decline in importance Which of the following sustainability challenges are the most critical to address for the future success of your business? Growth & employment Education Energy Climate change Corruption Peace & security Health Poverty eradication Water & sanitation Inequalities Food security 12% 16% 18% Note: Percentage represents the proportion of CEOs in each region numbering each issue among their top three most important sustainability challenges to address for the future success of their business 5% 5% 8% 10% 10% 14% 13% 23% 29% 28% 27% 27% 40% 37% 39% 37% 57% Global ASG 64% 62% 14
The immediacy of sustainability challenges in reflected in their relative importance for CEOs from region to region Priorities from region to region may reflect the lens of proximity a heightened perception of sustainability issues when their impacts are close by and immediate Which of the following sustainability challenges are the most critical to address for the future success of your business? Note: Percentage represents the proportion of CEOs in each region numbering each issue among their top three most important sustainability challenges to address for the future success of their business; central figures indicate the number of survey respondents in each region 15
CEOs continue to make the business case for sustainability, with market-facing motivations rising in importance Business leaders identify the potential for revenue growth & cost reduction, and consumer demand, as fast-rising motivators for action on sustainability Which factors are currently driving you, as a CEO, to take action on sustainability issues? Brand, trust & reputation Potential for revenue growth & cost reduction Consumer/customer demand Personal motivation Employee engagement & recruitment Governmental/regulatory environment Impact of development gaps on business Pressure from investors/ shareholders 15% 12% 12% 41% 42% 38% 31% 27% 24% 29% 49% 44% 47% 39% 2013 2010 69% 72% CEOs in ASG attach greater importance to the personal motivation and investor pressure in acting on sustainability Brand, trust & reputation Potential for revenue growth & cost reduction Consumer demand Employee engagement Governmental environment Impact of development gaps Pressure from investors 10% 22% 53% 52% 53% Personal motivation 57% 20% 28% Note: Percentage represents the proportion of CEOs numbering each issue among their top three choices 16
CEOs see consumers and governments growing in importance in influencing their approach to sustainability Investors and NGOs, amongst others, have remained relatively static in their influence on business leaders approach to sustainability Over the next five years, which stakeholder groups do you believe will have the greatest impact? 64% Consumers 58% Employees 45% Governments 39% Communities 28% Investment community 22% Regulators 26% Suppliers NGOs Organised labour 29% 23% 19% 22% 25% 19% Media 25% 24% 17% Boards 14% 16% 17% 15% 5% 15% 15% 4% 7% 7% 32% 28% 39% 42% 50% 46% 2013 27% 2010 2007 CEOs in ASG see consumers, employees, governments and regulators guiding action Consumers 62% Employees 48% Governments 43% Communities 17% Investment community 22% Regulators 33% Suppliers NGOs Organised labour Media 25% Boards 15% 3% 12% 18% Note: Percentage represents the proportion of CEOs numbering each issue among their top three choices 17
But many business leaders believe they may have reached a plateau in their progress on embedding sustainability into their organisations Companies continue to demonstrate a performance gap between ambition and execution on sustainability To what extent do you agree with the following statements about environmental, social and corporate governance issues? Companies should / My company does Include sustainability objectives in employee performance assessment & remuneration Incorporate sustainability issues into discussions with financial analysts Practice integrated reporting of financial and sustainability metrics Incentivise managers to prioritise the achievement of long-term sustainability goals over short-term sales/profits Measure both positive and negative impacts of their activities on sustainability outcomes Engage in industry collaborations & partnershipspartnerships Seek to move responsibility for sustainability from a separate department towards integration throughout functions Discuss and act on sustainability issues at the board level Companies should 47% 47% 49% 47% My company does 63% 73% 73% 74% 70% 69% 74% 76% 83% 93% 94% 85% Note: Percentage represents the proportion of CEOs selecting Strongly agree and Agree 18
CEOs identify barriers to progress including a lack of financial resources, competing priorities and the lack of a link to business value CEOs identify the lack of a clear link to business value as the fastest-rising barrier in preventing faster progress on sustainability Which barriers keep you, as a CEO, from implementing an integrated and strategic company-wide approach to environmental, social and corporate governance issues? Lack of financial resources Competing strategic priorities No clear link to business value Extending strategy through the supply chain Difficulty due to operating environment Implementing strategy across business functions Lack of knowledge Lack of recognition from investors Extending strategy through subsidiaries Lack of support from top management 8% 7% 12% 13% 18% 22% 27% 25% 22% 22% 22% 40% 44% 40% 37% 43% 33% 35% 30% Global ASG 51% Note: Percentage represents the proportion of CEOs numbering each issue among their top three choices 19
CEOs are struggling to quantify the business value of sustainability, and may not see the opportunities in moving faster Less than half of ASG CEOs report that they could set our their strategy to profit from sustainability, and just 17% are able to quantify the current business value My company is able to accurately quantify the business value of our sustainability initiatives My company could set out in detail our strategy for seizing opportunities presented sustainability over the next five years Strongly agree 0% 5% Strongly agree 3% 9% Agree 17% 33% Agree 47% 43% Neither agree nor disagree 37% 45% Neither agree nor disagree 33% 42% Disagree 23% 33% Disagree 10% 12% Strongly disagree 2% 5% Global ASG Strongly disagree 1% 0% Global ASG 20
To make progress, CEOs call for governments and policymakers to intervene to create an enabling environment for business to act Business leaders believe that government intervention will be essential to address market failure and harness sustainability as a transformative force in the economy How important will each of the following be to advancing sustainability: Governments increase efforts to provide an enabling environment for the private sector Governments provide stronger support and market signals to support green growth Very important 53% 47% Very important 50% 55% Important 29% 27% Important 35% 25% Neither important nor unimportant 14% 25% Neither important nor unimportant 12% 15% Unimportant 1% 0% Unimportant 1% 0% Not at all important 3% 2% Global ASG Not at all important 3% 5% Global ASG 21
CEOs call for harder measures of regulation, including regulation, standard-setting, subsidies and taxation ASG business leaders also reject softer and voluntary approaches, and express strong support for international trade rules as an effective policy option Which policy tools could be most effective for governments in promoting sustainability in your industry? Regulation and standards Subsidies and incentives Rule of law Taxation International trade rules Public investment Investment in development of the local workforce Information and voluntary approaches Public procurement and purchasing Trading schemes and markets 12% 12% 16% 15% 15% 21% 23% 28% 36% 37% 31% 27% 28% 26% 28% 26% 43% 48% 55% Global ASG 67% 22
Business performance Successful companies are not waiting for government action Leading companies are combining sustainability impact with business performance through a new approach focused on growth, innovation and value creation Transactional Outperforming industry peers; ad hoc efforts on sustainability motivated by short-term financial case Notional Underperforming industry peers on sustainability and on traditional business metrics of success Transformational Vulnerable Sustainability leadership Combining market-leading financial performance with sustainability leadership; turning sustainability to business advantage Externally recognised sustainability leader, but efforts may not be rewarded through superior business performance High performance and sustainability leadership Our analysis compares the business and sustainability performance of 77 of the largest companies that responded to this year s survey. Using Accenture s methodology to assess high-performing companies, based on eight metrics of current performance and future positioning, and an aggregate of the four leading sustainability indices, we isolated four distinct segments among companies approach to sustainability as a route to impact and value creation. The Transformational quadrant gives a sample of 21 companies that are combining sustainability leadership with market outperformance in their industry. 23
Seven Steps to Sustainability and Success This year, unique insights from CEOs have identified seven themes that are enabling companies to achieve value creation and impact on global sustainability challenges Realism & context Growth & differentiation Value & performance Technology & innovation Partnerships & collaboration Engagement & dialogue Advocacy & leadership Understanding and appreciation of the scale of global sustainability challenges and the opportunities they present. Sustainability as an opportunity to stand out with consumers & customers; to access new markets and segments with new products and services. Measurement, monitoring and management of sustainability metrics; quantification of business value; and tracking of impact on sustainability. Investing in technology-led solutions to sustainability challenges; generating competitive advantage through new technologies and business models. Partnerships within and across industries and sectors to find new solutions for sustainability. Understanding the needs and wants of all stakeholders; establishing two-way dialogues to negotiate the role of business in sustainability. Leadership in shaping the business contribution to global challenges; willingness to advocate for policy & market incentives that change the game. 24
The UN Global Compact-Accenture CEO Study on Sustainability 2013 Appendix
Appendix: Investors While many business leaders see investor interest in sustainability gradually increasing, it is not a critical driver for action; companies still struggle to communicate the business value of sustainability. 26
Appendix: Consumers Despite CEOs strong belief that consumer interest will be critical in making progress on sustainability, just 15% believe that good progress has been made over the past three years in instilling sustainability as a must-have factor for consumers. 27