Organizations are increasingly making firm commitments to sustainability. More than 700 of the largest 2,000 publicly traded companies have made net zero commitments, with 59 of the FTSE 100 committing to net zero emissions by 2050. Two-thirds the S&P 500 have set emission reduction targets of some kind.
Why Companies Aren’t Living Up to Their Climate Pledges
Five steps to help organizations operationalize their sustainability goals.
August 11, 2022
Illustration: Daniel Lievano
Summary.
Organizations are increasingly making firm commitments to sustainability. However, new research conducted by L.E.K. Consulting suggests many of these organizations are struggling to deliver on their commitments. Setting and balancing priorities is the main sticking point. Fifty-eight percent of executives said there are “significant differences of opinion within the leadership team” on balancing short-term priorities with long-term ESG goals. Boards and executives are aware of these risks, but often lack metrics or KPIs to track progress. Only a quarter (27%) of companies have any enterprise wide ESG KPIs in place, and fewer still have a full set in place (just 3%). Without such metrics, companies will continue to struggle to align executive remuneration with ESG targets. The authors offer five remedies to help companies get back on track: develop a shared vision for sustainability; invest in education to drive needed understanding and skills through the company; analyze both financial and non-financial factors related to strategic choices; establish KPIs; and tie executive compensation to sustainability targets.