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Are you a dismissive bottom liner or a sustainability pioneer?

ING study finds companies are in different stages of their sustainability journey as they grapple with complexity, cost and lack of knowledge as well as more immediate business challenges.

The majority of companies recognise the urgency around climate change and want to take action, but many don’t know what to do or how to go about it. In addition, companies are at different levels of maturity when it comes to sustainability, ranging from ‘dismissive bottom liners’ to ‘sustainability pioneers’, with ‘support-seeking novices’ somewhere in between.

For many years, climate change was something only eco warriors and green evangelicals worried about. But growing evidence of how it is affecting both our planet and its people is hard to ignore and sustainability is fast moving to the top of many boardroom agendas. More and more companies are feeling a responsibility to take action within their businesses to stop (or at least slow) the effects of climate change, whether this is because of pressure from consumers, regulators or an intrinsic desire to be more sustainable for future generations.

However, these are longer term ideals and a recent ING study found that although there is a strong desire among corporates to become (more) sustainable, there are other, more immediate, business challenges that take precedent, such as supply chain disruptions, staff shortages and rising energy and commodity prices, which are cutting into their profit margins. On top of this, implementing a sustainability strategy is seen as complex, expensive, time consuming and something that requires specialist knowledge that companies feel they don’t have, especially given the lack of consistency in the market around sustainable practices.

An additional challenge is the reputational risk companies face if they don’t transition and live up to society’s changing expectations. There is growing pressure from their customers and other stakeholders to meet higher environmental, social and governance (ESG) standards.

What the corporate decision-makers say

To understand the role of sustainability and sustainable finance in corporate decision-making, ING questioned 272 global business leaders about their ESG priorities. Among those surveyed were business owners, CEOs, CFOs and treasurers from large organisations (with revenues over €200 million, of which 42% are above €1 billion). The companies surveyed represent all sectors of the economy on three continents (Europe, Asia and the US).

Almost half - 49% - see climate change as the greatest threat to the environment, while 27% are threatened by the depletion of natural resources. For the vast majority (73%), their main operational priority is reducing carbon emissions. Equally important is mitigating the physical impacts of climate change. And while 86% expect their suppliers to also have some commitment to ESG, for only 11% it’s a deal breaker and companies are split on whether they should help their supply chains in becoming more sustainable.

There was also little differentiation between the three ESG priorities, with environment, social and governance rated as equally important. 

As to who should be responsible for the transition to a net zero economy, most business leaders felt that corporates should be leading the way, but that these efforts should be backed by governments.

The road to change

While awareness is generally high, when it comes to actual implementation of sustainability, companies are at different stages and levels of maturity - something we acknowledge when advising and supporting clients, looking at their specific needs.

Our survey found some don’t see the value of sustainability at all and focus on keeping their businesses ticking and profits churning. These dismissive bottom liners do the bare minimum to satisfy regulators and their stakeholders that their operations are ESG compliant.

Then there are the support-seeking novices. These are companies that recognise the need to take action to transform their business and reduce their emissions but don’t have the knowledge or resources to take the first steps.

And finally there are sustainability pioneers – companies who are leading the way to a greener future, have entrenched sustainability firmly into their business models and are now looking at how to take it even further.

Whatever stage of the journey they’re on, most companies tend to focus their sustainability efforts on improving their own operations. And many face similar hurdles: the complexity of transitioning to a net-zero world, not knowing how to go about it, a lack of funding, and the need for standardised regulations, terminology and methodology, which would create more transparency and make it easier to work with others to green their supply chains.

As one respondent put it: “I think it depends on who you talk to as everyone seems to have different measurements of what sustainable finance is.”

Depending on which stage they’re at, companies have different financial needs and requirements. For example, dismissive bottom liners prioritise business stability and strong financial planning. To them, ‘sustainable finance’ means long-term financial stability, there’s no environmental link. For sustainability pioneers, however, green financing is intertwined with their business strategy. These companies may be exploring innovative new solutions to bring them – and their supply chains – closer to net zero and as such they’re seeking innovative funding options that support these efforts. Support-seeking novices value the expertise of a financial partner who can advise them on an appropriate ESG strategy and funding options. For these companies, products such as green bonds or sustainability-linked loans are an opportunity to both finance their business needs and become more sustainable.

What this survey shows is that businesses recognise there are big challenges ahead. Sustainability is not a passing trend. It has become an essential part of business strategy and operations and is now seen as a key priority by business leaders. However, it’s a huge transition. Companies often lack the resources to achieve their ambition and need support. As a bank, ING has a key role to play here, tapping our own pioneering spirit to find innovative ways to facilitate and finance society’s shift to sustainability and contribute to progress.