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(1/3) Why must businesses commit to climate action?

Jun 14, 20244 min read

The ESG (Environmental, Social, and Governance) and CSR commitments of companies is becoming increasingly significant in defining their value. Nowadays, the analysis of non-financial performance criteria complements the assessment of financial performance.


In a series of three articles, we will explore how (i) stakeholders, (ii) opportunities for value creation, and (iii) regulatory constraints exert internal and external pressure on companies, encouraging them to make serious commitments to the environment and climate action.


Apolownia

I. COMPANIES ARE CONSTRAINED BY THEIR STAKEHOLDERS


Companies are being pushed by various stakeholders to make serious commitments to the environment and climate. These stakeholders include not only employees and future talent, but also consumers, clients, suppliers, investors, and shareholders, each exerting significant influence.


1. Employees and future talent: a driver of performance and attractiveness


The commitment of companies to the environment and, more broadly, to CSR, drives performance and talent attractiveness. The climate crisis and the health crisis related to the COVID-19 pandemic have transformed individuals' expectations, who now seek meaning in their work and alignment between their personal values and those of their employer.


According to a study by Elabe, 85% of active workers are concerned about climate change and the environmental situation, with more than one in five feeling "anxious and worried about the future." The majority of active workers (77%) believe that the state should act on ecological issues, but they also consider (50%) that companies must be actors of the transition.


Ecological commitment has become a key determinant in the employer-employee relationship. Seventy percent of employees believe that active engagement by their company in environmental protection would encourage them to stay, while 44% would consider leaving their job if the company acted against the ecological transition.

For recruitment, 62% of active workers see corporate engagement as a reason to apply, while 48% would be discouraged by a lack of commitment.


2. Consumers and clients: a catalyst for change


Consumers are at the heart of this transformation. An impactful and transparent CSR policy can significantly improve customer loyalty, perceived product quality, and brand image. Indeed, a study by Edelman revealed that 64% of global consumers are willing to switch, avoid, or boycott a brand based on its stance on social or political issues. Additionally, 51% of consumers say they would be more loyal and spend more with a brand that expresses views aligned with their own.


This trend underscores the importance for companies not only to adopt sustainable practices but also to communicate them effectively to gain and maintain consumer trust.


3. Investors and shareholders: a shift towards sustainability


Investors and business leaders are also showing increasing interest in CSR, often driven by regulatory, economic, and personal considerations. Over the past five years, capital has shifted towards sustainable investments at a growth rate six times that of traditional investments. Global assets in this field now total $4 trillion, covering a variety of instruments incorporating sustainable criteria.


This shift in capital shows that investors see sustainability not only as an ethical responsibility but also as an economic opportunity. Companies adopting sustainable practices can thus more easily attract investments and benefit from more favorable financing conditions.


In 2024, a marked trend has emerged among European SMEs: a growing awareness of the importance of reducing their greenhouse gas emissions. For the second consecutive year, an overwhelming majority (85%) consider this reduction crucial, even critical. Additionally, more than two-thirds view decarbonization as an opportunity. This evolution is accompanied by a significant increase in financial investments in this area, driven by customer demands and perceived economic benefits. In 2024, the number of SMEs investing in decarbonization increased by 5 points in Europe, from 38% to 43%. Leaders' motivations include regulation (72%), rising energy prices (62%), and growing customer demand, especially in the B2B sector, where large companies are exerting increased pressure on their suppliers to decarbonize their activities.


Finally, commitments made towards climate and sustainability have a positive effect on companies' stock market value in the short term. According to a study conducted by BCG, approximately 25% of Climate & Sustainability announcements have a significantly positive impact on companies' stock performance relative to their sector. This results in a relative Total Shareholder Return (rTSR) of +3.3% three days after the announcement compared to three days before the announcement.


In conclusion, companies are increasingly driven by stakeholders to commit to environmental and climate responsibilities. Employees seek meaningful work aligned with their values, consumers demand transparency and sustainability, and investors recognize the economic opportunities of CSR.

Commitment to CSR enhances performance, attracts talent, fosters customer loyalty, and secures favorable investment conditions. The growing investment in decarbonization, especially among European SMEs, highlights the urgency of these efforts.

Moreover, such engagement is crucial for maintaining and enhancing a company's reputation. In today's informed world, a company's environmental and social stance significantly impacts its public perception and market position.

Overall, the pressure from stakeholders is reshaping the business landscape, urging companies to take serious environmental actions for sustainable growth and a positive legacy.

 


ABOUT APOLOWNIA


Apolownia is a mission-driven company committed to making a significant impact in the climate sector.   


We support businesses and funds willing to engage in long-term and impactful decarbonization strategies - within and beyond their own value chain - by designing, implementing and monitoring science-based carbon reduction projects that restore natural ecosystems.  


Through technology and innovative solutions, we aim at shaping a resilient and environmentally friendly world, by encouraging the decarbonization of the economy and supporting social and environmental initiatives.  


You can drive positive change for the climate, biodiversity and local communities.  


Contact us to engage or for more information. Find us on www.apolownia.com.

 

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