‘Immediate boardroom action’ needed to tackle climate change risks

ESG issues have shot up company agendas, but the majority struggling with the 'scale of the challenge'

Most UK businesses have no “fully-fledged plan” in place to tackle climate change and other ESG risks, despite more than 80% saying this issue is being “actively discussed”, according to new research from KPMG.

The report, which is based on responses from 160 business leaders representing a range of industries across the UK, found ESG issues have shot up most companies’ agendas in the wake of the Covid-19 crisis, but the majority still don’t know what to do about it.

While 82% of respondents said climate change was being actively discussed or on the boardroom agenda, only 8% reported having a clear plan of action. Some 89% reported being in early stage discussions, while 3% had no plan at all.

The UK-centric research follows similar global surveys conducted by KPMG, which revealed ESG is becoming a key area of focus for businesses across the world. For example, according to the latest KPMG Global CEO Survey, 65% of CEOs believe that businesses must fill the void in societal challenges, while 76% agree that they are personally responsible for positive societal change as company leaders.

KPMG noted that although the coronavirus crisis has caused the postponement of COP26 this year, it has nevertheless accelerated the focus on climate change and other ESG issues among businesses.

Sue Bonney, KPMG UK’s head of ESG, said: “Before lockdown, as we counted down towards COP26 in Glasgow, there was growing debate about how to tackle emission reductions and transform the UK into a more sustainable, green economy.

“Although there were a few weeks pause in the early weeks, rather than becoming a distraction Covid-19 has accelerated the focus on the climate emergency. Talk now on any post-pandemic recovery almost always includes climate change at its heart.

“But our survey suggests that, while many businesses are taking ESG seriously, there is a long way to go before we can truly say that everyone is placing it at the centre of their future strategic growth plans.”

She pointed out that despite commuting, flights and construction coming to a standstill during lockdown, it is still only expected to lead to a 10% drop in emissions this year, which highlights “the scale of the challenge still ahead”.

“If we are to truly achieve the goal of transforming to a sustainable, net-zero economy, we need far greater collaboration and more immediate action at boardroom level,” she said.

The good news is, companies are increasingly seeing climate-related financial disclosures, such as the Task Force on Climate-Related Financial Disclosure (TCFD), as a ‘strategic risk issue’ rather than a box-ticking exercise.

Some 76% of business leaders surveyed by KPMG now see such disclosures as a strategic risk issue that needs to be addressed at board level, while only 24% see it as a useful compliance tool.

Simon Weaver, co-head of climate risk and decarbonisation strategy at KPMG UK, welcomed this shift in mindset, but said businesses need to start walking the walk on climate change issues.

The coronavirus pandemic was, to some extent, a dress-rehearsal for climate change. It has exposed the strengths and weaknesses of businesses throughout the UK, and should be the impetus for boardroom discussions on behavioural bias to ignore big, complex problems, the importance of real-life scenario planning, and the value of proper risk planning over simply being reactive,” he said.

“Clearly, the challenges are different for every sector and every business, but action is needed now. Our survey revealed a lot. It’s clear a lot of businesses are starting to take climate change seriously. But, deliverables and strategies are still part of the future for many. It’s important for the success of the economy and the sustainability of the country that we shift now from narrative to delivery.”

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Natalie Kenway

Natalie is global head of ESG insight for ESG Clarity and has been an investment journalist for 16 years. She won Editor of the Year at the Aviva Investors Sustainability Media Awards 2021, and was Winner...