Companies struggle with sustainability

The study reveals a discrepancy between the increasing importance of sustainability for boards of directors and companies and the practical implementation of sustainability measures. In view of the new reporting and disclosure requirements in the areas of environmental, social and governance (ESG) that came into force at the beginning of the year, this discrepancy is becoming even more pronounced - the need for action is becoming apparent.

Sustainability has not only gained momentum for boards of directors, but is also becoming a central pillar of corporate strategy. This was revealed by the biannual survey conducted by the swissVR association of boards of directors in cooperation with the auditing and consulting firm Deloitte Switzerland and the Lucerne University of Applied Sciences and Arts. 82% of the 409 board members surveyed at the end of last year reported a growing importance of sustainability over the past three years, with 25% even speaking of a strong increase in importance. The outlook for the next three years is equally clear: 84% expect the importance of sustainable development for their company to continue to increase.

The sustainability wave is being felt particularly strongly in the retail and consumer goods as well as construction and real estate sectors. In the retail and consumer goods industries, 97% of board members report an increase in the relevance of sustainability issues over the past three years, and 95% expect the importance of sustainability to continue to rise. In the construction and real estate industries, the figures are 89 percent each. These figures illustrate how strongly consumption and the construction industry are driven by a growing awareness of sustainability and the demand for environmentally friendly solutions.

Significance clearly recognized

Sustainability is also being discussed intensively on the management floors of Swiss companies: In almost all large companies (97%) and three quarters of small companies (75%), the topic has been on the agenda of the boards of directors in the last twelve months. The vast majority (85%) of all board members surveyed confirmed that their board had discussed sustainability issues in the last 12 months, with the majority of discussions taking place within the board as a whole and not in specialist committees.

Board members are aware of their responsibility and feel well equipped to address sustainability issues. 82% of respondents consider themselves equipped with the necessary expertise and 78% take an active role in defining the sustainability strategy. More than two thirds (70%) of respondents have also already defined important sustainability topics for their company.

"The survey results speak for themselves: sustainability has arrived in strategic corporate bodies and board members are equipped to set the course for sustainable development. The scope and complexity of ESG regulations are a major challenge for companies; their internal implementation must also interest the board of directors - not least because further regulatory steps have already been announced," says Mirjam Gruber-Durrer, lecturer at the Lucerne University of Applied Sciences and Arts at the Institute of Financial Services Zug IFZ.

Difficulties with the measurement

The survey also shows that a clear majority (60%) diagnose significant hurdles in measuring the environmental impact of their company. Time-limited resources (51%) and the costliness of sustainability measures (38%) are cited as further obstacles to sustainability efforts.

The pressure comes from outside

The survey also shows that the sustainability issues that currently affect companies the most come from outside and not from within the companies themselves: 59% of companies cite regulations and 56% the changing needs of customers. The low importance of shareholders is rather surprising: Only 18 percent of the board members surveyed named investors as important drivers for their sustainability. Among large companies, however, this figure is already a good third (34%).

Despite the generally high relevance of the topic and the importance they attach to the needs of their customers, less than half of the companies (49%) are developing their own more sustainable products or services. This is surprising, as there is hardly an industry in which the development of sustainable solutions for customers would not be possible or sensible, or which would not be affected by the new ESG reporting and disclosure obligations.

Blind spot in the supply chains?

It is not product development that is the most frequently implemented measure in the companies surveyed, but increased efficiency in energy use (69%). This is probably not least a direct reaction to the feared electricity shortage last winter and also makes sense for cost reasons.

Less than a third (30%) of respondents also state that they have implemented measures in their company to ensure that suppliers and business partners comply with sustainability criteria. Similarly, only 26% of board members say that their company is affected by sustainability risks along the supply chain. Against the background of the due diligence obligations that apply to many companies in the supply chain, these results appear very low; the question therefore arises as to whether awareness of risks in the supply chain is sufficiently heightened. However, particularly exposed companies are more cautious: risks along the supply chain are an important sustainability issue for more than every second company in the manufacturing and chemical industry (55%) and in trade and consumption (53%).

Lack of sustainability targets

Another challenge in the implementation of sustainability measures in Swiss companies is that only just over half of board committees (52%) have set sustainability targets for their company and measure their achievement. Only less than a quarter (23%) say they have fully completed these tasks and implemented all the necessary measures to measure the degree of target achievement - the figure for large companies is 37%.

In addition, many board committees appear to be inadequately informed: Only half (50%) receive regular sustainability reports on their companies; among large companies, however, the figure is 79 percent.

"The results of the swissVR Monitor clearly show that board committees are called upon to take the helm and ensure better implementation of the defined sustainability strategy. One effective approach could be to transfer specific sustainability issues to specialized committees in order to enable a deeper examination of the topic, prioritization of the measures to be taken, a focus on the issues relevant to the company and improved reporting. This would not only increase transparency, but also strengthen the accountability and effectiveness of sustainability efforts in companies," says Cornelia Ritz Bossicard, President of swissVR.

A sense of proportion needed in regulation

"The swissVR Monitor shows a clear discrepancy between the growing legal and social demands and the practical implementation of sustainability strategies in Swiss companies. Instead of creating additional pressure through further disclosure obligations, politicians should now promote the implementation of sustainability strategies through targeted incentives," says Reto Savoia, CEO of Deloitte Switzerland.

"Data collection and reporting play an important role in making progress measurable and transparent. However, the most important contribution to more sustainable development is made by sensible investments and innovative products and services. This increased innovative strength not only benefits companies, but also Switzerland as a business location and supports the preservation of our natural basis for life and production," says Reto Savoia.

Source: www.swissvr.ch www.deloitte.com