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Second climate risk report by Eversheds Sutherland and KPMG reveals the importance of the People Factor in helping companies achieve Net Zero

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Survey reveals increased corporate confidence in decarbonization plans, juxtaposed with a potential C-suite knowledge gap and impact on the workforce

Read the full report here

Boardrooms, senior executives and business leaders are increasingly confident in addressing challenges presented by climate risk, but a failure to consider the 'People Factor' in any boardroom decarbonization strategy could undermine climate change mitigation efforts, according to a new report from Eversheds Sutherland and KPMG.

The survey, with its findings published in a report entitled ‘Climate Change & the People Factor,’ reveals that the reality of climate change awareness has permeated boardrooms across the globe and is recognized as a priority issue with significant implications for companies' business models and impact on their stakeholders: from employees through to the broader community in which businesses operate. 

The survey also found that climate change expertise is valued increasingly highly. Many companies have already appointed climate change experts to their boards, while also looking to reskill and retrain their existing staff to meet the challenges of the low carbon economy. Planning and engagement with all stakeholders will be essential to a successful transition, as will working in partnership with government and educators to ensure the necessary supply of skills.

Climate Change & the People Factor’ has been published to coincide with the 2021 United Nations Climate Change Conference (COP26). The joint survey of 1,095 C-suite leaders across some of the world’s leading companies was conducted by global legal practice Eversheds Sutherland and professional services organization KPMG. The report follows a similar review of C-suite opinions and attitudes to climate risk, published by Eversheds Sutherland and KPMG in 2020, entitledClimate change and corporate value.

Key findings of the survey indicate growing confidence and opportunities for action:

  • All respondents said their companies have a strategy or plan to identify, qualify and report climate risk to the business. However, only half have established a clearly defined decarbonization plan to date
  • 74% say that they have the climate knowledge, resources, skills and expertise to develop and deliver on their current decarbonization plan. Last year, 47% said not having the right skills in the business was the most challenging barrier to decarbonization
  • Over half of respondents say their companies have not yet appointed a climate change expert to the board.

Impacts on the business and workforce are widely understood and expected:

  • Nearly all respondents recognize that significant changes are needed to their company’s business model, all or in part, to deal effectively with climate risk. Last year, only 74% identified that significant changes are needed to the business model
  • Approaching two-thirds of executives surveyed indicated that they expect some adverse impact on the workforce due to decarbonization, which includes nearly a third of respondents who anticipate redundancies as part of their transition to a low-carbon organization
  • Nearly all of those anticipating a skills shortage plan to upskill or retrain their workforces to meet their needs.

Engaging the workforce is expected to be critical:

  • As 46% of respondents say they anticipate a high level of resistance to the significant business model changes that will be required, effective change management will become an important factor
  • Many organizations have attempted to harness the goodwill of their workforces through social norms and supporting environmentally-friendly policies and benefits
  • While the vast majority of respondents said their companies have introduced performance objectives and remuneration incentives for director-level and senior staff, less than one-third have established individual or team KPIs, or remuneration incentives tied to decarbonization goals, for the wider workforce.

Climate Change & the People Factoris co-authored by Eversheds Sutherland and KPMG. Co-author of the report, Mike Hayes, Global Head of Renewables at KPMG Ireland said:

“Corporates have made significant progress in recognizing what needs to be done to address the challenges, compared to the initial report ‘Climate change and corporate value.’ What is clear though, is that more could be done at an individual and team level to assist with the drive towards decarbonization, and there is an opportunity for cooperation among businesses, training providers and governments to really advance this development and help ensure global businesses confront climate risk head-on.”

Joanne Hyde, Partner and Head of Employment at Eversheds Sutherland Ireland said:

“Business leaders have made significant progress in addressing climate risk within their organizations but recognize the upskilling challenges and the people impact of climate transition. However, they also see the opportunities to further engage employees around this important topic and that doing so can help to accelerate the transition; this may include incentivizing employees to achieve implementation of solutions within their companies.

“An organization that can harness both the skills and energy within the workforce to engage in the challenges presented by climate risk will see a significant boost in their progress towards decarbonization. However, to ensure the people factor isn’t overlooked, Governments also need to play an integral role in helping to ensure the retraining and upskilling of the workforce.”

Read the report, Climate Change & the People Factor, by clicking here.

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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