Nearly every day, another research finding, news story or environmental-related disaster piles more evidence on the reality that our planet is in crisis. Climate-driven drought is making dangerous wildfires more common, wreaking havoc on farmers around the world, and threatening hundreds of species with extinction.
Experts have warned that lack of action could result in alarming hunger levels around the world, mass migration challenges, the collapse of global financial markets and other social and economic disasters. Against this backdrop, business leaders are reexamining their organizations’ purposes and priorities.
In August 2019, the Business Roundtable, a group that includes CEOs from leading U.S. companies, committed to modernizing the purpose of a corporation. Challenging the age-old rule that a business exists to maximize profits for owners or shareholders, the executives agreed that companies must also protect the environment “by embracing sustainable practices” and consider stakeholders like customers, suppliers and broader society. That sentiment was echoed in “The Universal Purpose of a Company in the Fourth Industrial Revolution,” published by the World Economic Forum in December 2019.
Deloitte Global’s third-annual Readiness Report, “The Fourth Industrial Revolution: At the Intersection of Readiness and Responsibility,” shows that not only is the environment on executives’ minds, but also that climate change and environmental sustainability have become integral to how they’re managing their businesses. Surveying more than 2,000 global executives, Deloitte Global found that almost 90 percent agreed to some degree that the impacts of climate change will negatively affect their organizations. Nearly six in 10 claimed to have internal sustainability initiatives in place, from reducing travel to eliminating plastics, and more.
“With an increasing number of catastrophic, climate-related events affecting populations and geographies, we’re seeing business leaders increasing their focus and attention on climate and environmental sustainability,” said Deloitte Global board chair Sharon Thorne. “Executives are beginning to acknowledge the business imperative of climate change. And they are beginning to act as they feel mounting pressure from stakeholders and threats to their own businesses.”
Millennials Demand Action
Executives also understand that today’s consumers—especially millennials and Gen Zs—are looking for more than transactional relationships with companies. Whether they’re buying candy bars or jeans, consumers increasingly demand that businesses do their part to reduce their environmental impact. According to the 2019 Deloitte Global Millennial Survey, more than one in four millennials and Gen Zs believe businesses should try to help mitigate the effects of human-caused climate change and protect and improve the environment. Yet only 12 percent believe corporations are working to address things like climate change.
Students have taken to the streets and staged strikes for climate action, and pressure groups and scientists are advocating for mass civil disobedience to force politicians to prioritize climate change. But other actions are more widespread and far less overt. For instance, the survey showed large numbers of young consumers have started or stopped relationships with businesses based on their perceptions of companies’ commitments to society and the planet. Almost 40 percent of those asked said they would stop buying from a company whose products or services negatively impact the environment. Companies that fail to respond to these feelings and motivations will eventually feel the impact on their bottom lines.
“Young people care intensely about the world they’re inheriting and are motivated to stand up for the causes in which they believe,” wrote Deloitte Global chief people and purpose officer Michele Parmelee. “Their passion is obvious and their resolve is strong. But they’d be the first to tell you that they need help to create change. That’s where business can make a difference.”
Business Is Starting To Respond
Research indicates that consumer demand is, indeed, pushing businesses to alter their operations. In another Deloitte Insights survey, for instance, nearly two-thirds of companies said their customers have been demanding they switch to renewable sources of electricity. Nearly half said they’re working on doing just that.
Executives interviewed for Deloitte Global’s Readiness Report shared some of the actions their organizations are taking. Adobe, for example, has set a goal to run on 100 percent renewable energy by 2035. It is expanding its global headquarters in San Jose, and the new building will be all-electric, meaning it can be powered by clean, renewable energy. Likewise, at the Kawasaki Smart Community Center, Toshiba Group’s business base, Toshiba has installed 35,000 sensors to control lighting, air conditioning and elevator operations based on the movement of people, helping Toshiba reduce CO2 emissions by 50 percent.
More and more, the pursuit of similar actions to reduce environmental impact and benefit society will be necessary for businesses to survive, let alone thrive. Consumers are demanding that the companies they patronize do more to be good corporate citizens. They’re speaking with their voices and their wallets, and they’re not inclined to take “no” for an answer.
Fortunately, profit incentives—as well as executives’ increasing fears about climate change’s potential negative effect on business operations—are giving companies plenty of reasons to join with citizens and act on climate change.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Deloitte provides audit, consulting, financial advisory, risk advisory, tax and related services to public and private clients spanning multiple industries. Deloitte serves four out of five Fortune Global 500® companies through a globally connected network of member firms in more than 150 countries bringing world-class capabilities, insights, and high-quality service to address clients’ most complex business challenges.
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