But annual PwC survey also reveals around two thirds of UK business leaders are yet to set credible net zero targets
UK CEOs are ahead of their global counterparts in their engagement with the net zero transition, but a majority are still underestimating the climate risks faced by businesses.
That is one of the main conclusions from consultancy giant PwC’s 25th Annual CEO Survey, which last autumn polled nearly 4,500 CEOs in 89 countries to ascertain their current priorities and concerns.
PwC said the latest results suggest UK CEOs are “approaching a tipping point on Environmental, Societal and Governance (ESG) related activity, with an increased transparency and personal accountability on issues such as climate change and inequality”.
Just over a third of UK CEOs have now made a net zero commitment for their organisation, compared to just 22 per cent globally. Moreover, 19 per cent of UK CEOs have their personal annual bonus and long-term incentives linked to their greenhouse gas emissions reduction targets.
However, PwC said that while significant progress has been made in recent years a majority of large businesses are still yet to fully engage with the net zero transition.
Two thirds of UK CEOs are yet to set a net zero or carbon neutral target, while only 34 per cent are very concerned about the impacts and threats of climate change on their business. For those businesses without a net zero target in place, 93 per cent of UK CEOs said that they did not feel their organisation produces a meaningful amount of greenhouse gas emissions.
Emma Cox, global climate leader at PwC, said pressure was mounting on businesses without net zero targets to develop credible decarbonisation strategies.
“Business leaders are upping the ante on climate action and other ESG activity, and it’s encouraging that many are taking personal responsibility for progress but there’s still a lot more action needed,” she said. “Achieving net zero by 2050 means big changes for everyone and we’ve seen a real ramp up in commitments in the lead up to COP26. Those who haven’t led on this agenda are now being encouraged by their peers, employees, customers, and investors to respond, resulting in clear opportunities to help organisations understand the impacts of climate and what more they can do.”
In the wake of last year’s COP26 Climate Summit an analysis from the Net Zero Tracker group found that around 90 per cent of global GDP was covered by some form of net zero target, while more than 4,000 organisations, including publicly listed firms with $19.5tr of combined annual revenues, had adopted net zero goals.
The suggestion that a firm’s emissions are too small to necessitate a net zero target is also set to be contested in the coming years, with the UK government moving to make net zero plans mandatory for large firms and growing numbers of corporates calling on their suppliers to develop their own decarbonisation strategies.
The PwC survey found that where companies had net zero or carbon neutral commitments in place the biggest factors informing CEOs’ strategies were the need to mitigate climate risk, attract or retain talent, and meet customer expectations.
Decarbonisation strategies are also increasingly being integrated into executive performance metrics and bonus schemes, according to PwC.
The survey found almost one in five UK CEOs have their personal annual bonus and long-term incentives linked to their greenhouse gas emissions reduction targets and almost half have long-term corporate strategies focused on reducing emissions. Meanwhile, a third of the largest organisations by revenue are committing to environmental, social, and governance (ESG) targets in their bonus and incentive plans.
“CEOs are putting their money where their mouth is on ESG,” said Phillippa O’Connor, reward and employment leader at PwC UK. “It shows they are serious and it has the power to really move the dial. Until recently, executive bonuses and incentives tended to be linked solely to financial and strategic performance. But among large and listed companies we’ve seen this connection to ESG targets becoming far more common. What we’re seeing now, and what will get these numbers moving very quickly upwards, is a wave of CEOs at smaller organisations taking note and following suit.”