24.05.2024

80% of companies see sustainability as potential revenue

The majority of companies see sustainability as a value creation opportunity, with more than three-quarters foreseeing potential benefits ranging from higher revenue and profitability to lower cost of capital, although many also expect increased sustainability costs and the need for significant investment, according to a new Morgan Stanley study cited by esgtoday.com.

The survey results show that almost all companies are now aware of the impact of sustainability on their long-term corporate strategies. 85% of respondents reported seeing sustainability as a value creation opportunity, including 53% who viewed it primarily as value creation and 32% as both value creation and risk management, and 15% viewed sustainability primarily as risk management. Only 1% respond that sustainability is not essential to long-term corporate strategy.

Sustainability as a value creation opportunity topped the list of "very important" reasons reported by companies for pursuing sustainability strategies, cited by 50% of respondents, closely followed by compliance with government regulations at 48% and moral obligation at 47%.

Over 80% of companies see potential financial opportunities from their sustainability strategies in the next 5 years

81% of respondents believe that sustainability is somewhat (41%) or very (40%) likely to lead to higher profitability, and 79% see it as driving higher revenue (35% very likely, 44% somewhat likely) and 82% to improve revenue generation opportunities (38% and 44%).

Another key benefit highlighted by the study is improved access to capital. 77% of respondents reported that sustainability could lead to lower costs of equity or debt over the next five years.

Companies are also aware of the potential challenges and costs associated with their sustainability strategies, including 69% expecting a lot (28%) or unlikely (41%) costs from changing processes, 72% seeing higher costs or legal risks from sustainability regulation, and 73% see higher costs or shortages of raw materials in the next five years.

The biggest challenge reported by respondents was restructuring supply chains to meet human rights obligations, which was considered somewhat or very likely by 74% of companies. Among the challenges, they also point to the large investments (31%) they have to make to restructure their business. 22% of participants said it was difficult to justify the short-term negative financial impact, even with the long-term benefits.

92% of companies expect climate change to affect their business

The survey also found that almost all companies, 92%, expect climate change to affect their business models by 2050. 23% report that it is already a risk to their business model today, as well as technological change (25%). competitor actions (25%) and supply chain volatility (23%).

The survey also highlights companies' perceived need for sustainability expertise at board level. 57% of respondents reported that Board members could benefit from more knowledge regarding sustainability provisions. Overall, only 37% of respondents agree that their company's board has expertise in sustainability.

“Companies are increasingly seeing sustainability factors as an integral part of the company's long-term value creation. There may still be challenges in developing expertise and funding models, but corporate leaders are looking at sustainable business practices as driving value creation as well as reducing risk,” commented Jessica Alsford, Chief Sustainability Officer at Morgan Stanley and CEO of the Institute for Sustainable Investing.