Climate risk and responsible business principles are being discussed in Britain’s boardrooms, but the majority of businesses have yet to implement a clear plan, according to new research from KPMG.
The firm questioned more than 160 business leaders, representing a range of industries from across the UK, on their ESG credentials.
When asked if climate change was a top priority, 82% said it was already being actively discussed, or on the boardroom agenda. However, when asked if they had a clear view of the risks ahead and how to tackle them, only 8% of businesses reported having a fully-fledged plan in place, with 89% in early stage discussions, and 3% not at all.
Despite the postponement of COP26 in Glasgow, the COVID-19 pandemic appears to have accelerated consideration of climate change and social responsibility putting pressure on companies and politicians to ‘build back better’ and focus on a green recovery.
The survey follows similar research globally by KPMG which reveals ESG is becoming an increasingly crucial focus area for business leaders. The latest KPMG Global CEO Survey found 65% of CEOs are looking to businesses to fill the void in societal challenges and 76% agree that, as leaders, they are personally responsible for change on societal issues.
KPMG UK’s Head of ESG, Sue Bonney, said:
“Before lockdown, as we counted down towards COP26 in Glasgow, there was growing debate about how to tackle emission reductions and transform the UK into a more sustainable, green economy. Although there were a few weeks pause in the early weeks, rather than becoming a distraction COVID-19 has accelerated the focus on the climate emergency. Talk now on any post-pandemic recovery almost always includes climate change at its heart. But our survey suggests that, while many businesses are taking ESG seriously, there is a long way to go before we can truly say that everyone is placing it at the centre of their future strategic growth plans.
“Throughout lockdown, millions of daily commutes, flights and construction works ground to a halt, visibly transforming the environment around us. But, amazingly, the reduction in emissions for this year will still only be less than 10%, just showing the scale of the challenge still ahead. If we’re to truly achieve the goal of transforming to a sustainable, net-zero economy, we need far greater collaboration and more immediate action at boardroom level.”
Five years ago, the then Governor of the Bank of England, Mark Carney, established the Task Force on Climate-Related Financial Disclosure (TCFD). Its aim was to ensure investors could identify how resilient an organisation was to the potential effects of climate change, and – through stress testing and impact studying - drive real change at Board level in UK companies. To date the TCFD has been seen by many organisations as a regulatory disclosure exercise. But, as companies have started to quantify the risk and opportunities related to climate change, it has become clear it is a strategic risk issue that needs to be addressed at the Board level, with 76% of business leaders surveyed by KPMG viewing the measures as a ‘strategic risk issue’, with less than a quarter (24%) regarding climate-related financial disclosure as a useful compliance tool or helpful disclosure.
Simon Weaver, Co-Head of Climate Risk and Decarbonisation Strategy at KPMG UK, commented:
“Understanding the impacts on your business from climate change is no longer an ‘added extra’. It’s a core issue which we all, as corporate leaders, must respond to – not just from a wider purpose perspective, but crucially for the resilience of our own organisations. The Coronavirus pandemic was, to some extent, a dress-rehearsal for climate change. It’s exposed the strengths and weaknesses of businesses throughout the UK, and should be the impetus for boardroom discussions on behavioural bias to ignore big, complex problems, the importance of real-life scenario planning, and the value of proper risk planning over simply being reactive.
“This isn’t a subject or theme that can be relegated to a specialist team. We must all, collectively and collaboratively, tackle climate change head on. Clearly, the challenges are different for every sector and every business, but action is needed now. Our survey revealed a lot. It’s clear a lot of businesses are starting to take climate change seriously. But, deliverables and strategies are still part of the future for many. It’s important for the success of the economy and the sustainability of the country that we shift now from narrative to delivery.”
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About KPMG in the UK
KPMG LLP, a UK limited liability partnership, operates from 21 offices across the UK with approximately 17,600 partners and staff. The UK firm recorded a revenue of £2.40 billion in the year ended 30 September 2019. KPMG is a global network of professional firms providing Audit, Tax, Legal and Advisory services. It operates in 154 countries and has 200,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
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