Eversheds Sutherland & KPMG International survey reveals knowledge gap and jobs threat owed to climate-related risks.
Global businesses are facing an era of unprecedented disruption and transformation as a direct result of climate change. The financial cost of climate risk, estimated to be upwards of US$1 trillion, poses a significant threat to businesses, and a joint survey of more than 500 director and C-suite executives from the world’s leading companies, conducted by global legal practice Eversheds Sutherland and global professional services organization, KPMG, revealed that company boards and management do not have the skillset to confront climate-related risks.
Seventy-four percent of senior decision-makers who responded to the survey in August 2020 agreed their company’s management must improve its skillset to deal with climate-related risks, and that failure to do so could pose a threat to jobs; the survey revealed that 78 percent of executives think climate risk is a key factor in whether they will retain their job over the next 5 years.
The survey’s key findings feature other significant human and cultural elements to climate risk within organizations:
- One-quarter work for companies that offer remuneration incentives for directors to achieve decarbonization targets.
- There is a significant push from below, with 40 percent identifying that employees are leaving roles because they are unhappy about their employer’s climate impact.
- One third indicated that employees have actively expressed dissatisfaction with their employer’s climate impact.
- 14 percent of respondents indicated it is more difficult recruiting young people because of their views on the company’s climate impact.
The report detailing the survey’s findings, Climate change and corporate value: What companies really think was announced on Wednesday, 11 November at the Green Horizon Summit, a virtual conference held in place of the 2020 United Nations Climate Change Conference, COP26, which is now due to be held in 2021.
Dr Mark Carney, United Nations Special Envoy for Climate Action Finance and Trustee of the World Economic Forum, and former Governor of the Bank of England, notes within the report’s foreword:
“I would urge company boards to have a robust conversation around the risks and opportunities that climate change poses to their business; seek out this available help; and act early to mitigate climate change risks and turn them into commercial opportunities. Their focus will help break the tragedy of the horizon, creating sustainable business models that society is increasingly demanding and which future generations deserve.”
“Climate risk is a trillion-dollar problem that companies must face-up to. It’s not only about the physical impacts of climate change but also the transitional risk of failing to decarbonize sustainably and consequentially losing key stakeholders such as investors and customers,” as Michelle T. Davies, International Head of Clean Energy & Sustainability at Eversheds Sutherland, comments. “The survey demonstrates a significant gap: three-quarters of executives think climate risk poses a threat to their job while only 26 percent admitted they have the skillset to deal with the risk. Companies need to upskill their staff and implement strategic plans that begin to mitigate climate risks. Companies must work with the legal sector to put these plans in place, in doing so they will be transitioning and importantly improving their bottom line.”
“Because of the recognition of climate risk across the corporate landscape, there is now much greater focus on decarbonization, and, consequently, companies need to develop a solutions mentality to develop sustainable business models. This will require upskilling boards, management and staff in areas such as, corporate PPAs (power purchase agreements), energy efficiency and the circular economy,” says Mike Hayes, Global Head of Renewables for KPMG International and Global Head of Climate Change & Decarbonization for KPMG IMPACT. “Also, a whole new financing environment centered on green bonds and other similar products has emerged to provide the necessary liquidity.”
