By Anne Cosgrove
From the March / April 2023 Issue
The impact of the natural environment on business operations has become increasingly clear to leaders across both the public and private sectors. Energy reliability and cost, business continuity and resilience, and a growing awareness of environmental impact are factors influencing business leaders, government officials, utilities, and other stakeholders in the site selection process. A growing number of relocation and expansion decisions are influenced by corporate energy and sustainability goals.
According to a recent report from Deloitte, “2023 CxO Sustainability Report: Accelerating the Green Transition,” C-level business leaders (CxOs) view climate change as a top priority for their organizations amid global uncertainty. Asked to rank the issues most pressing to their organizations, many rated climate change as a “top three issue,” ahead of seven others, including innovation, competition for talent, and supply chain challenges. In fact, only economic outlook ranked slightly higher.
Moreover, 75% of these business leaders said their organizations have increased their sustainability investments over the past year, nearly 20% of whom said they’ve increased investments “significantly.”
Deloitte built upon past research by surveying more than 2,000 C-level leaders across 24 countries to gauge concerns and actions from business leaders on climate change and sustainability. The report also identifies key recommendations for organizations to help close the gap between ambition and impact in order to accelerate progress to a low-carbon economy.
“If there was any doubt that climate change is an enduring part of the business agenda, the increased focus on sustainability by leaders over the past year should put it to rest. In a year of continued uncertainty, disruption, and competing business challenges, leaders ranked climate change as a top issue,” said Deloitte Global CEO Joe Ucuzoglu of the survey findings. “The path to a more sustainable future will take time, it will require businesses investment, and it will be driven by new and innovative technologies, and creative approaches. It is promising to see that C-suite leaders are making sustainability a priority and increasing their investments to help lead the way.”
Almost every respondent to the survey said their organization has felt the impacts of climate change over the past year. These leaders reported “resource scarcity/cost of resources” as the top issue already impacting their companies (46%), while 45% highlighted “changing consumption patterns or preferences related to climate change” and 43% reported “regulation of emissions” as other top issues impacting their companies. Additionally, around a third of executives said climate change is negatively affecting their employees’ physical (37%) and mental (32%) health.
In addition to the impact on their businesses and stakeholders, 82% of executives said they have been personally impacted by climate events over the past year, with extreme heat the most frequently cited issue, and 62% said they feel concerned or worried about climate change all or most of the time.
Despite these concerns, 78% of leaders are “somewhat” or “extremely” optimistic the world will take sufficient steps to avoid the worst effects of climate change, and 84% agreed/strongly agreed that global economic growth can be achieved while also reaching climate change goals.
“Our survey tells us that CxOs believe that both their organizations and the global economy can continue to grow while reaching climate goals and reducing greenhouse gas emissions,” said Jennifer Steinmann, Deloitte Global Sustainability & Climate Practice Leader commenting on the findings. “Leaders should also harness their optimism to drive sustained, measurable impact, which will require ramping up climate adaptation efforts while also facilitating innovation that ensures a just transition for all stakeholders.”
Organizations are feeling broad pressure to act on climate change from across their stakeholder groups, according to the survey. Sixty-eight percent of CxOs said they feel a large-to-moderate degree of pressure from each of the following groups: board members and management, regulators and government, and consumers and clients. Organizations are also feeling pressure from their shareholders and investors (66%), employees (64%), and civil society (64%).
Employee activism is specifically driving increased action, with more than half of CxOs saying employee pressure on climate matters led their organizations to increase sustainability actions over the last year; 24% said employee activism led to a “significant” increase. Regulation is also influential: 65% of CxOs said the changing regulatory environment led their organizations to increase climate action over the last year.
In line with last year’s report, CxOs chose brand recognition and reputation, customer satisfaction, and employee morale and well-being as three of the four top benefits of their companies’ sustainability efforts, suggesting many see climate actions as a way to strengthen stakeholder relationships. The lowest-ranked benefits (all financial) suggest CxOs continue to struggle to define the longer-term financial opportunities that sustainability measures offer.
Climate Action Presents Opportunities, Challenges
Organizations are taking action: 59% are using more sustainable materials, 59% are increasing the efficiency of energy use, 50% are training employees on climate change, and 49% are developing new climate-friendly products or services. They are also ramping up climate adaptation efforts: 43% are updating or relocating facilities to make them more climate change resistant; 40% are purchasing insurance coverage against extreme weather risks; and 36% are offering financial assistance to employees who have been impacted by extreme weather.
2022: Big Year For Clean Energy
By BF Editors
In January, the American Clean Power Association (ACP) released a report that shows a significant increase in clean energy purchases by corporations in the United States. The “Clean Energy Powers American Business,” report shares data on how commercial and industrial (C&I) companies are accelerating the clean energy transition through purchases directly from wind, solar, and energy storage plants.
The tech industry led the ACP list, with top purchasers being Amazon, Meta and Google (in that order). A large volume of power purchase agreement (PPA) announcements made Amazon the top corporate purchaser.
Corporations are purchasing clean energy from 540 projects spread across 49 states, Washington, DC, and Puerto Rico. Still, Texas is home to the majority of corporate contracted clean power, followed by Illinois and Ohio.
Solar projects are outpacing wind in the report as the preferred choice for corporate buyers, with utility-scale solar accounting for 58% of corporate contracted clean power. Hybrid projects that include storage—primarily solar plus storage—are growing quickly.
In its Clean Power Quarterly Market Report—Q4 2022, ACP reported the U.S. wind, solar, and battery storage sectors installed 9.6 gigawatts (GW) of utility-scale clean power capacity in that quarter.
Battery storage had a record-breaking year: 4 GW were commissioned in 2022. This surpassed the previous record of 3 GW commissioned in 2021. Battery storage projects now make up 12% of the development pipeline.
The clean power development pipeline has reached a new high, thanks in part to market reaction to the Inflation Reduction Act (IRA), with 13% more capacity in development queues since Q4 2021 and 135 GW of clean power projects in late stages of development. There is now 227 GW of operating clean power capacity in the U.S., enough to power 61 million homes.
However, in the first full quarter since the IRA went into effect, policy headwinds continue to hold back the industry’s potential, according to ACP. The industry ended the year with the lowest fourth quarter since 2019, down 21% from 2021.
Texas led installations with 9.2 GW installed in 2022, followed by California (4.7 GW), Oklahoma (1.5 GW), Florida (1.2 GW), and Nevada (0.9 GW). Meanwhile, Texas is also the state with the most clean energy in development, representing 18% of the total development pipeline, followed by California (9%), New York (8%), Indiana (5%), and Virginia (5%).
In New York, Energy storage systems are playing a crucial role in a clean energy future—more than $350 million in incentives have been authorized to accelerate adoption. New technologies and hubs are being established throughout the state. Companies including Li-Cycle and Plug Power are developing innovative lithium-ion battery and green hydrogen fuel production facilities in the state.
In Rochester, NY, Li-Cycle, a leader in lithium-ion battery resource recovery and lithium-ion battery recycling, announced in February it had reached a conditional commitment with the U.S. DOE for a $375 million loan for continued development of its Rochester Hub. The Hub is expected to become a significant source of battery-grade materials, including lithium, nickel, and cobalt, and will be the first-of-its-kind commercial facility in North America. ♦
However, companies are less likely to implement actions that demonstrate they have embedded climate considerations into their cultures and have the senior leader buy-in and influence to effect meaningful transformation. For example, 21% of CxOs indicated their organizations have no plans to tie senior leader compensation to environmental sustainability performance, and 30% said they have no plans to lobby government for climate initiatives.
Additionally, when asked how serious certain groups are about addressing climate change, only 29% of CxOs said they believe the private sector is “very” serious. Nearly a quarter said the difficulty of measuring their organizations’ environmental impact was a top barrier to increased action, and nearly one-fifth cited cost and focus on near-term issues as barriers.