Environmental sustainability has become a top 10 priority for business leaders as investors, employees and regulators push companies on how they're combating and addressing climate change.
According to Gartner's annual CEO and Senior Business Executive Survey, environmental sustainability has hit the top 10 list of CEO priorities for the first time in the history of the survey, as it jumped to eighth place from 14th in 2019 and 20th in 2015. The survey was conducted between July 2021 and December 2021 among more than 400 senior business executives across various industries.
The survey revealed that environmental sustainability serves as a "competitive differentiator," according to respondents. Seventy-four percent of CEOs said increasing their environmental, social and governance efforts serves as an attractor to investors.
"CEOs say investors want better profit returns and growth in revenue, while also driving environmental and social changes," said Kristin Moyer, distinguished vice president and analyst at Gartner. "And CEOs are finding that ESG is a way to attract customers, talent and investors."
Indeed, investor interest is behind the U.S. Securities and Exchange Commission's proposed climate risk disclosure rule, which would make reporting on climate-related risks and greenhouse gas emissions mandatory. The comment period for the proposed rule was recently extended to June 17 due to an outpouring of interest from stakeholders.
Though the proposed SEC rule is not a driver for business interest in sustainability, Moyer said it does put additional pressure on companies to "solidify their processes for identifying, managing and disclosing climate risks and opportunities."
However, as environmental sustainability efforts gain more traction, CEOs and senior business leaders are running into some challenges when it comes to setting and meeting sustainability goals.
Environmental sustainability hurdles
Survey data showed that compliance, employee reluctance to change and supply chain engagement are the top three things hindering the progress of sustainability programs, Moyer said. IT and data limitation are also challenges, she added.
Sustainability executives spend "inordinate amounts of time" hunting for the environmental, social and governance data they need, and sustainability programs often begin with tools like spreadsheets. While spreadsheets are low-cost, Moyer said they're also low-quality.
Indeed, IBM's annual CEO survey noted that 51% of CEOs point to lack of data insights, unclear return on investment and technological barriers as significant challenges to their sustainability efforts.
Kristin Moyer Distinguished vice president and analyst, Gartner
"CEOs are leading during one of the most complex environments ever, including war, inflation, talent shortages and the COVID-19 health crisis," said John Granger, senior vice president of IBM Consulting, in a news release. "Despite these challenges, they aren't taking their foot off the gas when it comes to sustainability, and more now rank it among their top priorities. Yet, many don't fully appreciate the extent to which data and technology can bridge the gap from strategy to impact."
Moyer said business environmental sustainability and environmental, social and governance programs need consistent, timely and detailed data. That means companies need to invest in the "ESG data identification, collection and quality assurance process."
One way to help avoid fragmented data collection and streamline sustainability and environmental, social and governance efforts is for companies to create an executive committee providing coordination, governance and oversight, she said.
"Sustainability is a business transformation, and every business transformation ends up having all kinds of challenges," Moyer said. "Most important of all is to remember that sustainability is a long-term transition. Progress will not be linear -- business change never is."
Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.