The C-Suite Is Increasingly in Front on Climate
Michael Torrance, Chief Sustainability Officer, sat down with Melissa Fifield, Head of the BMO Climate Institute, to discuss the key findings and trends from the 2nd Annual BMO Climate Institute Business Leaders Survey.
In this episode:
How and why C-suite leaders are increasingly taking a leading role in driving climate-related matters in their organizations
The major challenges business leaders are facing in addressing climate change and how they can navigate these challenges
How investors and customers are holding corporate stakeholders accountable for their actions around climate change
BMO’s research findings that are likely to be discussed by global policymakers during COP28
Climate's really becoming something that customers and investors are holding corporate stakeholders accountable for, and now we're seeing that companies are responding.
Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment, business practices and our world. The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries.
Hi, Melissa. Thank you for speaking to me today and welcome to the podcast.
Thanks, Michael. Great to be here.
So just as an introduction for people who may not be familiar, what is the BMO Climate Institute?
Sure. The Climate Institute was created to be a center of climate expertise. So we convened knowledge, data, resources from across the bank in order to be our client's lead partner in the transition to a net-zero world. We really serve as a hub whose purpose is to connect the dots between many internal experts we have as well as those outside the bank to help us advance our own thinking about how to best accelerate climate solutions and serve as an important resource for our clients.
And you've done a really interesting survey here that we're going to be talking about. It relates to small and medium-sized companies and the views of business leaders on climate and the impact of climate on their business. Can you provide listeners with a little bit of background on this research? Why did the Climate Institute select this topic? What was it all about? And then we can get into discussion about the results of it.
Yeah. This is the second year we've done this survey and it's important to realize that this is part of BMO's Climate Ambition, part of our commitment to be our client's lead partner in that net-zero transition. So what we sought to do with the research was really learn from business leaders, the attitudes, challenges and trends that they're seeing and how they're acting on them with regard to climate change and sustainability. This year we focused on decision makers at companies, both in Canada and the United States, so we expanded the survey group. In the first year we had focused on small and medium-sized companies. In the second year in this latest research, we've increased the number of respondents to include large businesses as well to understand how they are addressing some of these challenges in their own business plans.
And so in terms of the results of the survey then, what are some of the key findings that you had this year?
One of the key trends that the Climate Institute has been tracking is this question of whether or not North American businesses are prepared for climate risks and if they're prepared for the energy transition. The research we just conducted suggests that in the past year, more companies are taking action, which is encouraging. 32% of business leaders say their companies have a plan to address climate change, so that's 32% versus 26% last year. In the United States, 38% of respondents say they have a climate mitigation plan versus 28% last year. So the share of US business leaders who say they're developing climate plans fell to 29% versus 38% last year. It's also notable that in Canada, the share of business leaders who say their companies have a climate plan ticked up to 27% from 24% last year. That means there's an 11 percentage point difference in the share US business leaders with the climate plan versus Canadian business leaders, and that data really reflects a shift in the US from working on climate plans to actually implementing them, so again, encouraging trends.
So there seems to be increasing awareness and also action around climate topics from business leaders. What do you think that's attributable to, I mean, there's been a lot of things happening? There's obviously been a lot of extreme weather events over the last year or two. There's more regulation in this space, but what did you find were some of the key drivers for why this shift seems to be happening?
Yeah. I think some of the survey results can be attributed to the time of year when the survey was conducted. The survey went out in August of 2023 when we know that a lot of parts of the US and Canada were experiencing extreme heat and an extreme weather generally, so that certainly has an impact on people's mindsets as they're thinking about some of these challenges. The survey itself asked, "Why are you taking climate action?" And the most frequent response overall is, "Because it's important for the environment," which is steady from last year's survey, but the findings this year are really important. We grouped the responses to the question of why companies are taking action into two buckets. So the buckets are, "One, because it's good for the planet, and two because it's good for my business." The responses that are in the good for my business bucket rose to 61% this year. That's up 10% from last year.
Conversely, the responses in the, "I'm doing this because it's good for the planet," fell 59% from 69%. So companies aren't becoming less philanthropic or less focused on the environment. Rather, we think that more business leaders are developing an understanding that climate change is a business risk that needs to be managed, becoming more of a priority to them in their business planning. For example, among US respondents, 33% said they are taking climate action because their companies can be run more efficiently and more effectively by addressing climate. That's up six percentage points over last year. And in Canada, respondents who said their company is taking action to meet sustainability goals rose to 28% from 23% last year. Climate's really becoming something that customers and investors are holding corporate stakeholders accountable for, and now we're seeing that companies are responding.
Well, that's really interesting, Melissa, that you've identified that connection with business opportunity. And it makes sense when you think about it that if a company's investing in energy efficiency or waste reduction, it'll have a decarbonization impact, but it could also actually save them on costs of electricity or unproductive use of goods and materials, for example. Or if there's resilience investment to reduce flood risk and be able to prevent physical hazards that are affecting their business, that could have a positive impact. But of course, there's a lot of upfront costs that can be prohibitive for this kind of investment, and businesses are facing many different challenges, including inflation and other topics that are adding to the competing demand on their cash flows for this kind of investment. What did you learn in your survey, if anything, about the challenges that companies are facing and how they're responding to those challenges in order to take action on this topic?
Yeah. We generally tend to frame addressing climate in business plans as a risk mitigation play, but I think what we're continuing to see is that there are those opportunities that you mentioned, opportunities related to efficiency, reduced power costs, et cetera. But cost does continue to be one of the biggest barriers in developing ways to address climate change. Lack of data, lack of awareness, lack of internal expertise, these are all distant secondary factors compared to the issue of cost, and that was the case in last year's survey as well. It shows that there's really a need for accessible financial solutions to help business leaders understand what those costs may be and to feel more confident that their companies can afford to adequately and effectively take climate action and address the impacts of climate on their business plans.
A solid majority of business leaders say they would like to hear more about the financial options to improve climate resilience. More than three quarters of survey respondents say they would also be interested in insights on how to adapt and thrive in this evolving climate landscape, maybe financial premiums for meeting climate related targets and analysis, a better understanding of how climate will impact their business. Again, this is key to BMO's Climate Ambition to really be a resource to help our clients navigate the energy transition and adapt to the changing climate, and it's an opportunity for BMO to help support companies that need help with their climate plans.
So Melissa, COP28 is just around the corner, and it's going to be focused as the last few have been on various things, but including the role of the private sector. Your survey is focused on North American, in that respect, it's more domestic than global in its focus, but what do you think the implications are of what you've found for global policymakers that are headed to Dubai for COP28?
We're really encouraged by the signs of momentum we're seeing among business leaders taking action. It's probably not a coincidence. As I mentioned, the survey was administered in August during a summer when many extreme temperature records were broken, and were sensitive to the challenges the research revealed, for example, the cost challenges we just talked about. Sustainable finance or blended finance solutions can help address some of these challenges and are likely to be a hot topic at COP28. Even for companies that can afford their climate plans, knowing the most effective actions to take can be difficult as well. Survey results suggest that business leaders, particularly in the US have become less certain about the impact of various actions related to reducing greenhouse gas emissions. For example, most business leaders believe using renewable, compostable and recyclable resources will have at least some impact on reducing emissions, but that majority has shrunk 10 percentage points from last year to 73% of business leaders. So I think what we're really interested to see is how carbon accounting and the use of offsets can also help accelerate climate solutions. I know that'll be a hot topic at COP as well.
When you've identified that this is being increasingly integrated into core business considerations about cost management or strategic opportunity, did you find that that means that there's really the highest levels of the organization engaged in this topic, or is it still a topic that's of more interest to the sustainability offices and communications teams?
Yeah, the research revealed important insights about who is driving the climate action in North American companies. In the past, it was sustainability officers, CSR offices, communications officers, really driving the climate agenda within a company. But our research suggests that C-suite officers may increasingly be out in front on climate, so that's some encouraging news. Again, I think this has to do with a growing understanding that climate is an important business factor. 42% of C-suite leaders are very concerned about the impact of climate change and the impact of that on the future of their businesses, much higher than VPs and directors in the same organizations. For example, C-suite leaders are more likely to think climate is having a negative impact on business, that companies can be more profitable by addressing climate, and that investors are increasingly expecting companies to do their part on climate.
On one hand, it's encouraging to see these most influential leaders in companies that they appear to be leading on climate issues in their organizations. But on the other hand, these findings raise important questions about how C-suite leaders can get the rest of their organizations to follow them on climate. Best practices to reduce the awareness gaps on climate between leadership and middle management continue to be something that is worth surfacing and sharing more broadly. That's also something that we'd like to explore further as the Climate Institute.
Well, thanks Melissa, for telling us about the results of this survey. Are there any final thoughts you'd like to leave with our audience?
I think it's worth noting that people tend to frame the impacts of climate change as risks or challenges. The survey found that 34% of Canadian business leaders believe cost is the biggest barrier to a climate plan or a strategy. But I think this is a misconception and that developing a climate strategy or plan for your business can also uncover opportunities. Opportunities like we talked about such as efficiency and cost savings, especially given the concern about the rising cost of energy, and commercial opportunities such as appealing to new customers and new product and service offerings. And despite cost being a concern, we were encouraged to see that business leaders are increasingly putting plans in place to address climate change to be better positioned to make progress toward a net-zero future. You can find more information about the details of the research that we conducted at sustainabilityleaders.bmo.com.
Thanks a lot, Melissa, for your time. And congratulations on releasing the survey results.
Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group. To access all the resources we discussed in today's episode and to see our other podcasts, visit us at bmo.com/sustainabilityleaders. You can listen and subscribe free to our show on Apple Podcasts or your favorite podcast provider, and we'll greatly appreciate a rating and review and any feedback that you might have. Our show and resources are produced with support from BMO's Marketing Team and Puddle Creative. Until next time, I'm Michael Torrance. Have a great week.
For BMO Disclosures, please visit bmocm.com/podcast/disclaimer.
Michael Torrance is Chief Sustainability Officer of BMO Financial Group and is passionate about sustainability, especially as it pertains to corporate governance an…(..)View Full Profile >
Melissa Fifield leads the BMO Climate Institute, a center of expertise accelerating climate solutions by bridging science, policy, finance and economics. She is a g…(..)View Full Profile >
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