Recognising climate risk will define action taken by business leaders

A study from PwC suggests the more business leaders think their company is likely to be impacted by climate change, the more likely they will take action.

What inspires C-suite leaders to take action on climate change? The PwC Global CEO Survey report believes the answer is straightforward – awareness of climate risk. The report spoke to business leaders about their exposure to the potential threats of climate change, and the data collected created an index determining the likelihood that respondents would initiate climate-related actions, like emission reductions or using climate-friendly products. The data from the study presented a pattern that a more significant exposure to climate change, as perceived by a leader, corresponds to a higher figure on the climate action index. Furthermore, similar studies show a direct connection between the perception of climate risk and their confidence about long-term success. The bigger threat that CEOs consider from climate change, the more likely they feel their business won’t be economically sustainable in the long term if it remains on its existing path. The connection between the considered risk and planned action suggests three critical factors for the C-suite leader:

Measuring your business’s climate risk exposure: Over or under-estimating climate risk can considerably impact business strategy and planning. The quality of climate data has improved, making it easier for business leaders to incorporate climate-focused factors into their business plans. Continued measuring of climate risk exposure can enable businesses to focus on actions that will strengthen and grow their competitive advantage.

Managing the supply chain – Climate change will impact the operations of a business and others across its entire supply chain – some of which may be in areas likely to experience more severe climate risks. As experienced during the pandemic, disruption to supply chains can result in business operations ending. Focusing on creating resilience against climate risk needs strong connections with key suppliers.

Work with your investors

Comparing the results of the PwC CEO survey with the findings from the Global Investor Survey indicates that CEOs are less likely than investors to voice their concerns about the potential financial implications of climate change on businesses. Furthermore, CEOs stated considerably less progress on climate actions that investors consider broadly effective. Collaborating with investors about the business’s climate plans may be required to create a clear understanding of how an organisation views climate risks and what it is doing about them.

Overall, the risk action link implies that business leaders understand the mounting pressures from climate risk and recognise that implementing the necessary actions to mitigate these risks must happen soon.