CEOs’ Prioritisation Of Sustainability Dips; AI & Inflation Atop Agendas: Report

New research from Bain & Company points to a sharp decline in CEOs’ relative prioritisation of sustainability, as AI, growth, inflation, and geopolitical uncertainty have risen to the top of their agendas.

Slowing momentum on sustainability could come with a tangible cost. Bain estimates a temperature increase of 2 degrees Celsius could cut $6 trillion from the value of the S&P 5001, in addition to the devastating environmental and social consequences.

However, Bain’s research shows companies are struggling to meet their existing commitments. Of the companies disclosing their progress via CDP, 30 per cent are well behind on their Scope 1 and 2 emissions reduction goals, and almost half are behind on Scope 3.

Many companies are reassessing, adjusting, and, in some cases, retracting their climate commitments. These are among the findings of Bain & Company’s ‘Visionary CEO’s Guide to Sustainability 2024’, released today.

“The transition to a sustainable world is following a familiar cycle,” said Jean-Charles van den Branden, Bain’s global Sustainability practice leader. “What began a few years ago as boundless excitement has given way to pragmatic realism. As the challenge of meeting bold commitments becomes clear, many companies are rethinking what is achievable and on what timeline. But slowing progress would be a mistake. Our research shows many sustainable technologies are likely to reach their tipping point more quickly than expected. Forward-thinking companies will stay the course and lead the way as a mix of new technologies, consumer and customer behaviour, and smart policy creates valuable opportunities for their industries.”

Extreme Weather Fueling Increasing Consumer Concern About Climate Change

Even as CEOs deal with competing priorities, the message from consumers around the world is clear. In a global Bain survey of nearly 19,000 consumers in 10 countries, 61 per cent of people said their concerns about climate change have increased over the past two years, often sparked by personal experience of extreme weather. Consumers in Brazil, Indonesia, and Italy—geographies that have experienced devastating weather events in recent months—show the most increasing concern for climate change. And while 76 per cent of global consumers believe a sustainable lifestyle is important “because their actions have an impact,” consumers in Brazil (90 per cent), Indonesia (90 per cent), and Italy (84 per cent) feel an even greater sense of accountability for their own environmental footprints.

In India, 64 per cent of people surveyed say their level of concern about climate change has increased. This could be driven by the spiking levels of pollution in major cities as well as the growing awareness of environmental impact through the influence of social media. When living sustainably, consumers in India tend to adopt habits that focus on reducing consumption, enhancing reusability, and avoiding waste—shaped largely by cultural norms and financial considerations. While some of these trends mirror those in other countries, Indian consumers are notably more inclined to adopt a vegetarian or vegan diet and much less likely to recycle compared to developed markets like the US or other environmentally conscious developing markets such as Indonesia.

 "Indian consumers prioritise health, price, and quality while shopping. When choosing sustainable options, they predominantly seek products with 'natural' attributes across various categories. For consumers in India, packaging choices are very important; 83 per cent believe the environmental impact of packaging is very important compared to a global average of 61 per cent. This presents a significant opportunity for businesses to lead by innovating to offer sustainable products that align with their health and quality expectations at competitive prices,” said Ravi Swarup, Partner and India lead for consumer products practice at Bain & Company.

 When it comes to sustainable shopping, globally consumers say brands and retailers play a big role in their decision-making process. While personal experience with extreme weather is the top reason consumers say they decided to buy sustainable products, 35 per cent say they made the choice due to media articles and documentaries, 33 per cent attribute it to availability, and 28 per cent credit awareness campaigns by brands and retailers.

In India, 40 per cent of consumers say personal experience with extreme weather as the top reason they decided to buy sustainable products, followed by 37 per cent say it is due to social media campaigns and advertisements and 32 per cent were influenced by peers.

"Our research in India highlights the need for consumer companies to tailor their strategies to local preferences by emphasising natural and vegetarian product options, prioritising packaging that minimises waste, and promoting mindful consumption. Building partnerships across the value chain to increase accessibility and affordability of sustainable products will also be key to meeting the evolving expectations of Indian consumers” said India-based Karthik Ganesan, partner and a leading member of Bain & Company’s consumer products practice.

Sustainability Remains A Top Concern For B2B Buyers

It’s not just consumers who are shopping for sustainability. Bain’s survey of 500 B2B buyers and sellers shows sustainability is now one of corporate buyers’ top three purchasing criteria and 36 per cent say they would leave suppliers that don’t meet sustainability expectations. Nearly 60 per cent say they’ll be willing to do so three years from now. Likewise, Bain’s survey found nearly 50 per cent of corporate buyers said they would pay a sustainability premium of 5 per cent or more today, and they expect their willingness to pay to increase in the future.

 This message seems to be getting lost on suppliers. While 85 per cent of suppliers say they embed some degree of sustainability in their products and services, only 27 per cent consider themselves very knowledgeable about their customers’ sustainability needs. 

Bain outlines four steps—on customer, value, salesforce, and pricing—suppliers can take to start selling sustainability smarter.

Bringing AI & Sustainability Together To Generate Business Value

Consumers and customers continue to rate sustainability as an important purchase criterion, but they often lack a clear understanding of what makes a product or service sustainable. Bain suggests AI can help close this gap by providing more effective approaches to communicating about sustainable products and propositions.

 “We encourage companies to embed AI within sustainability initiatives to fuel innovation and resilience,” said van den Branden. “But it’s critical they understand and address the potential impact of AI on their company’s carbon emissions from the outset. By embedding sustainability from the start, businesses can lead the charge toward a greener, tech-driven future.”