The highest-ranked benefits noted by CxOs include brand recognition and reputation; customer satisfaction; and employee morale and well-being. This suggests that CxOs see climate action as beneficial to stakeholder relationships. Interestingly, the lowest-ranked benefits include revenue from both longstanding and new business; asset values; cost of investment; and operating margins. This suggests CxOs continue to struggle with reconciling short-term costs of transitioning to a low-carbon future, with long-term business resilience.
In the New Zealand context, CFO’s tell a similar story. Brand recognition and reputation are rated among the top benefits of action. In the 2021 NZ CFO Sustainability Snapshot Survey, launched in collaboration with the Sustainable Business Council and Toitū Tahua: Centre for Sustainable Finance, 54 per cent identified competitive/reputational advantage as the top driver of sustainability action in their organisation.
Further findings from the CFO survey align with those in the Deloitte global CxO survey. In particular, that the short-term costs of transitioning are not understood or articulated -undertaking emissions planning, budgeting and forecasting, obtaining external assurance and accessing sustainable sources of capital and funding were the three activities that respondents identified as ‘unsure’ if they would progress or ‘not a priority’ to progress in our NZ CFO Survey. Furthermore, 59 per cent were ‘unsure’ if they would progress or it was ‘not a priority’ to progress internal carbon pricing.
Interestingly, inaction due to the uncertainty around costs of transition does not marry up with one of the core drivers of sustainability action identified in our NZ CFO survey, where 41 per cent of respondents said changing consumer preferences/demands was a driver of action, and 29 per cent identified investor or shareholder demands as a driver. The consumer base and wider stakeholder demands for companies that are transitioning to a lower-carbon way of doing business is recognised at present – however, the cost-benefit analysis is proving difficult for C-suite to undertake, articulate, and act upon.
Understanding the costs of transition is important, but this cannot be done without also understanding the benefits. Our Asia Pacific Turning Point report demonstrates that there is a significant economic benefit to be gained from rapid climate action: $47 trillion in the Asia Pacific region according to our models. This report explains that the cost of inaction is too high to ignore, especially considering the size of the possible economic benefit from rapid decarbonisation. The report debunks the myth that growth is incompatible with climate change solutions and provides a compelling argument for thinking not solely about the costs, but to give the benefits of climate change action the attention it deserves.
At Deloitte New Zealand, we are helping organisations to understand the costs and benefits involved in transitioning to a lower-carbon way of doing business. By incorporating climate change scenario analysis and utilising tools that enable climate risk assessment and cost-benefit analysis, we help organisations understand the true costs, in the short and long-term to enable meaningful action that supports sustainable, resilient and successful business operations. We can support businesses to assess their climate risks and opportunities, implement internal carbon pricing, and provide ESG due diligence assessments for transactions that enable consideration of costs for climate action not only during the deal process, but post deal too. We also support businesses to undertake integrated reporting, to articulate their strategy on ESG, climate action and future resilience.
