Some 85% of companies see sustainability as a value creation opportunity, a new study by Morgan Stanley‘s Institute for Sustainable Investing has found.
The report, Sustainable Signals: Understanding Corporates’ Sustainability Priorities and Challenges, surveyed 300 global businesses, including private and public firms with more than $100 million in revenue. The majority of respondents were those with decision making responsibility on sustainability matters.
How sustainability influences strategy
When asked how sustainability impacts long-term corporate strategy, 53% said that it is ‘primarily’ and 32% ‘partly’ a value creation opportunity, the study found.
Value creation was also identified as the top reason companies are pursuing their sustainability strategy, with half (50%) rating it as a very significant reason.
Other reasons cited by respondents as to why they were pursuing a sustainability strategy included compliance with government requirements (48%), having a ‘moral obligation’ to do so (47%), expectations from customers (45%), CEO expectations (44%), and expectations from lenders (32%) among others.
Just over a quarter (26%) cited pressure from NGOs, activists and media, however.
Converging strategies
“Sustainability strategies and core business strategies are converging,” commented Jessica Alsford, chief sustainability officer at Morgan Stanley. “Companies increasingly see sustainability factors as integral to the company’s long-term value creation.”
Respondents identified investment concerns as the primary barrier to implementing their sustainability strategies.
Some 70% of respondents regard required investment as either a very ‘significant’ or ‘somewhat significant’ hurdle. This compares to issues such as lack of corporate leadership (19%) or employee skills (19%). Other notable barriers include conflicts with financial goals (28%) or the business model (24%), and macroeconomic uncertainty (25%).
Competing priorities
“Sustainability as an investment theme continues to evolve towards more nuance and rigour as investors must confront competing priorities – such as climate and the social costs of high energy prices – and focus on ‘real’ impact,” added Melissa James, head of the Global Capital Markets ESG Center of Excellence.
“As a consequence, companies continue to engage on the topic of accessing capital to finance their sustainability goals and initiatives. As we approach deadlines for various climate commitments from corporates and investors, there will be a continued push for financing clean tech and facilitating the energy transition, resulting in a natural maturation of the market.”
Impact on business
Some 23% of respondents noted that they have already seen an impact from climate change on their operations.
This places climate change on a par with more traditional risks like supply chain instability and geopolitical conflict (both 23%), and just below the risks currently having the biggest impact, such as technological change and actions of competitors (both 25%).
Looking at the medium and long-term risks, 92% of respondents anticipate climate change impacting their business model by 2050.
“There may yet be challenges in developing expertise and financing models, but corporate leaders view sustainable business practices as fueling the creation of value as well as the mitigation of risk,” Alsford added.
The full report can be found here.
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