A survey conducted by Morgan Stanley unveils significant insights into corporate attitudes towards sustainability and its financial implications.
According to ESG Today, the study, titled “Sustainable Signals: Understanding Corporates’ Sustainability Priorities and Challenges,” surveyed over 300 public and private companies globally, with revenues exceeding $100 million. The findings shed light on the evolving perspectives of businesses across North America, Europe, and the Asia Pacific region regarding sustainability’s role in their strategies.
A staggering 85% of respondents acknowledge sustainability as a value creation opportunity, underlining its growing importance in long-term corporate planning. Within this, 53% of companies primarily view the practice as a means of value creation, while 32% see it as both value creation and risk management. Conversely, only a marginal 1% perceive sustainability as inconsequential to their corporate strategy.
Among the compelling reasons driving companies towards sustainability, the survey identifies value creation opportunities as the most significant motivator, with 50% of respondents highlighting its importance. Compliance with government regulations closely follows at 48%, underscoring the increasing regulatory pressure on businesses to adopt sustainable practices. Additionally, 47% of companies cite a moral obligation as a driving force behind their strategies.
Financial opportunities stemming from sustainability initiatives are substantial, with over 80% of companies foreseeing potential gains over the next five years. Notably, 81% anticipate higher profitability, 79% expect increased revenue, and 82% foresee improved cash generation capabilities. Moreover, sustainability is perceived as a catalyst for accessing capital, with 77% of respondents believing it could lower the cost of equity or debt.
However, while companies recognize the benefits of sustainability, they are also cognizant of the challenges it entails. Nearly 70% anticipate costs from process changes, while a similar percentage foresee legal risks and higher costs associated with sustainability regulations. Additionally, 74% of companies anticipate challenges in restructuring their supply chains to meet human rights obligations.
Investment requirements pose a significant barrier to implementing sustainability strategies, with 31% of companies citing it as a major obstacle. Moreover, conflicts with financial goals and the difficulty in justifying short-term financial impacts further complicate the adoption of sustainable practices.
The survey underscores a growing awareness among companies regarding the impact of climate change on their business models. While 92% expect climate change to affect their operations by 2050, 23% already perceive it as a risk today. This highlights the urgency for businesses to integrate sustainability considerations into their strategic planning.
Jessica Alsford, Chief Sustainability Officer at Morgan Stanley and CEO of the Institute for Sustainable Investing, emphasized the convergence of sustainability strategies with core business objectives. She remarked, “Sustainability strategies and core business strategies are converging, with companies increasingly seeing sustainability factors as integral to the company’s long-term value creation.”
As companies navigate the complex landscape of sustainability, the need for expertise at the board level becomes apparent. The survey reveals a perceived deficiency in sustainability knowledge among board members, suggesting a pressing need for upskilling in sustainability regulations, financial instruments, and disclosure practices.
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