When CEOs see climate risk, they step up

What spurs CEOs to take action on climate change? According to PwC’s 26th Annual Global CEO Survey, the answer is simple: awareness of climate risk. The survey asked executives how exposed they thought their company was to threats posed by climate change. Then, using data from the survey, PwC created an index to gauge the likelihood that respondents would take future climate-related actions, such as reducing emissions, introducing climate-friendly products or processes, and developing data-driven mitigation strategies. When analysed in relation to each other, the two groupings of data reveal a pattern: a more acute climate-threat exposure, as perceived by the CEO, corresponds to a higher score on the climate action index. What’s more, similar analysis of related findings reveals a compelling link between a CEO’s perceptions of climate risk and their concerns about their company’s long-term viability: the greater the threat that CEOs see from climate change, the more likely they are to say that their company won’t be economically viable after ten years if it continues on its current path. 

This relationship between perceived risk and planned action points to three urgent imperatives for the C-suite: 

• Check your climate-risk exposure. Over- or under-estimating climate risk can significantly affect strategy and planning. Fortunately, the quality of climate data and projections are improving. That should make it easier for leaders to bring climate factors into business decisions. And ongoing monitoring of climate-risk exposure can help target actions that better preserve and grow your competitive advantage. 
• Coach your supply chain. Climate change doesn’t just endanger a company’s own operations. It also threatens businesses across its supply chain—some of which may be in regions facing greater climate risks than those affecting the company’s home base. And, as many executives learned during the early months of the covid-19 pandemic, supply chain snarls can bring your business to a halt. Building resilience against climate risk requires strong relationships with key suppliers. Even a modest nudge from an important customer can heighten their appreciation of climate risk, prompting them to act.
• Consult your investors. When PwC compared the findings from the CEO Survey with results from PwC’s Global Investor Survey, the results showed that CEOs are less likely than investors to express concern about the possible financial impact of climate change on companies. What’s more, CEOs reported significantly less progress on climate actions that investors see as broadly effective. An open dialogue with investors about the company’s climate outlook may be needed to help them understand how the company sees climate risks and what it is doing about them.

Overall, the risk–action correlation suggests that executives recognise the pressure created by climate risk—and they know that actions to mitigate those risks can’t wait.

Data analysis by Shir Dekel