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

  • Global
  • United Kingdom

    10-11-2021

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

    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’ was published on Tuesday, November 9, 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, entitled ‘Climate 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
    • Seventy-four percent say that they have the climate knowledge, resources, skills and expertise to develop and deliver on their current decarbonization plan. Last year, 47 percent 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 percent 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 percent 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 Factor’ is co-authored by Diane Gilhooley and Herbert J. Short, Global Co-Heads of ESG at Eversheds Sutherland; Mike Hayes, Global Head of Renewables for KPMG International and Global Head of Climate Change & Decarbonization for KPMG IMPACT; and Sophie Heading, Global Geopolitics Lead, KPMG International.

    Mike Hayes, 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.”

    Diane Gilhooley, said:

    “Business leaders have made significant progress in addressing climate risk within their organizations but recognize 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. Incentivizing employees to achieve implementation of solutions within their companies will help with that engagement. 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.”

    Sophie Heading, said:

    “The conversation around climate change often focuses on having the right policies, the right investment, the right technologies. These are critical, of course, but what about the human element? After all, it is the people within organizations that are expected to play a decisive role in the ability to meet ambitious global targets. Business leaders are beginning to invest in their human capital, to engage employees on the transition to low-carbon business models and make the most of their considerable influence over global workforces to unlock the ideas, innovation, skills and talent that will likely be needed in this race to net-zero.”

    Herbert J. Short, said:

    “The reality of transitioning to a global, low-carbon economy is becoming very real across the world. This is a once-in-a-lifetime transition for many businesses, with different implications for employees and their broader communities. However, corporations are not the only solution. Governments need to play an integral role in helping to ensure a retraining and upskilling of the workforce. There is a lot of focus right now on the physical decarbonization approach, so the people factor could easily be overlooked if governments don’t pay attention.”

    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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