Decarbonization is more a costly undertaking rather than an investment.
That is a conclusion from a recent Deloitte survey of nearly 140 U.S. energy and manufacturing financial executives. Deloitte observed that most CFOs and financial executives surveyed revealed they are not directly involved in setting decarbonization strategy at their respective energy and manufacturing companies. In a corresponding study, the consultancy notes that financial execs struggle with how to make their firms’ portfolios greener while meeting shareholder expectations on the balance sheet.
Specific takeaways from Deloitte’s survey of financial executives include:
- 73% stated their organizations have a decarbonization strategy but fewer than one-half of individuals surveyed stated they have participated in its development.
- Just 17% view money spent on decarbonization as a profitable investment.
- More than 50% see the lack of clear and consistent environmental, social, and governance (ESG) reporting guidelines as the biggest impediment to decarbonization strategies.
- Organizations that afford their financial execs larger roles in shaping decarbonization strategy and invest more heavily in green initiatives have found a cash flow equation to fund said endeavors. Organizations that are less engaged in decarbonization follow a traditional cash flow allocation.
“The investment challenges inherent in transitioning to a new low-carbon economy provide a unique opportunity to financial executives to lead in one of the world’s biggest business and financial transformations,” stated Deloitte. “ESG metrics are becoming as important as earnings per share, meaning that the perspective and role of the CFO’s office should stay one step ahead in this evolving environment.”
Dividing survey participants in the “Future-focused” and “Conventional” camps, Deloitte observed key differences in how their respective organizations pay for efforts to implement their decarbonization strategies. The graphic below from Deloitte compares the Future-focused and Conventional approaches.
The full report is available on Deloitte’s website.
