LSHC cut of the Deloitte 2024 CxO Sustainability report: Organisations are increasingly investing in efforts to prioritise a low carbon future
By Marcia Costa, Manager, and Karen Taylor, Director, Deloitte Centre for Health Solutions
Our Deloitte 2024 CxO Sustainability Report: Signs of a shift in business climate action’, published in September 2024, was the third consecutive year that Deloitte has surveyed global CxOs on their views and efforts on climate change. The survey conducted between May and June 2024, received responses from over 2,100 executives across 27 Countries, 396 were from life sciences and health (LSHC) organisations. The 2024 analysis found a notable increase in investment in sustainability efforts, and in the words of Deloitte’s Global Sustainability Leader, Jennifer Steinman, ‘early but critical indicators that executives are realising profound business opportunities in the transition to a low-emissions future’. As we did for the 2023 global report, the Centre for Health Solutions has analysed the responses from LSHC executives, to explore the extent to which the LSHC industry’s position has changed and how this varies from the overall global response. This week’s blog explores our findings.
A brief synopsis on the global report
Deloitte’s first global CxO sustainability report in 2022 had as its strap line ‘The disconnect between ambition and impact, and found that while CxOs apprehension about the planet’s climate had increased there were multiple disconnects between business leaders’ opinions and motivations, the actions their organisations were taking, and the impact they were having.i The 2023 global report, Accelerating the Green Transition, found business leaders increasingly aligned around the need to address climate change, ranking it as a top three priority issue second only to the economic outlook. While the vast majority of CxOs shared a view that the world could achieve global economic growth while also reaching climate change goals, there was still a gap between actions and impact as organisations were slower to implement the ‘needle moving’ actions that would embed sustainability into the core of their strategies, operations, and cultures.ii
Our analysis of the changes in LSHC CxO’s survey responses in 2024 compared to 2023
In 2023, we analysed the LSHC cut of Deloitte’s 2023 report and published our findings as a ‘Thoughts from the Centre’ blog in February 2023.iii We found that despite the previous year being riven by significant global challenges including economic uncertainty, geopolitical conflict, supply chain disruptions and talent shortages, 42% of global leaders ranked the threats posed by climate change as a top priority second only to the economic outlook. However, fewer LSHC CxO’s ranked climate change as a ‘top priority’ (32%) in 2023, with a higher percentage ranking the economic outlook and competition for talent as equal top priority followed by innovation and the changing regulatory environment, ahead of climate change.
Despite competing pressing issues, climate change is the main pressing issue for LSHC organisations
While acknowledging the continued economic and geopolitical volatility and importance of climate changes, the global responses in 2024 put the economic outlook and innovation (including AI) as slightly higher priorities, see Figure 1. In contrast, climate change has moved to being the top pressing issue for LSHC organisations (39% ranked as their top priority issue, an increase of 7% from the 2023 survey.
Figure 1. 2024 CXO survey: What does your organisation see as the most pressing issues to focus on over the next year? (rank nine options in order of importance)
Source: Deloitte analysis of LSHC executive responses in 2024 CxOs sustainability survey
Moreover, further analysis shows that more than 78% of LSHC CxOs say they feel concerned about climate change all or most of the time and 77% expect climate change to impact their company’s strategy and operations to a high or very high extent over the next three years (compared to 70 % of global executives indicating a higher degree of concern within LSHC). The top climate challenges already impacting LSHC companies include changing consumption patterns or preferences (52%), regulations aimed at decreasing emissions or environmental impacts (52%), and increased insurance costs or lack of insurance availability (50%). Most LSHC executives are beginning to recognise the potential of sustainability as a driver of innovation and transformation, as opposed to merely a compliance and risk management exercise.
These sentiments are reflected in notable increases in investment, which is a key enabler to develop, implement and scale sustainability within a business. Global CxOs are prioritising and increasing investments in sustainability, with 85% reporting an increase in investments, up from 75% last year. This positive sentiment is even higher across LSHC, with 89% of LSHC organisations having increased their sustainability investment in the past year, up from 74% in 2023. This also reflects the sentiments expressed by over 90 per cent of LSHC leaders that the world can achieve global economic growth while also reaching climate change goals and that their company can continue to grow while reducing greenhouse gas emissions.
Pressure from stakeholders, especially board members and shareholders/investors, is driving action
Increasing in investment also reflects the continued pressure from multiple stakeholders, particularly shareholders/investors and competitors/peers, with the vast majority of executives feeling pressure across stakeholders' groups to increase climate action. Higher percentages of LSHC organisations felt these pressures across all stakeholder groups (except civil society) compared to the global respondents (see Figure 2).
Figure 2. To what extent does your company feel pressure to act on climate change from your different groups of stakeholders?
2023
2024
Source: Deloitte analysis of the 2023 and 2024 CxO Sustainability survey.
In 2023, at the global level, the most pressure was coming from board members/management, shareholder/investors and consumers/clients. Whereas for LSHC organisations it was board members/management, and regulators/government. In 2024, the pressure to act at the global level was still mainly from shareholders/investors but regulators/government were seen as exerting greater pressure, slightly higher pressure than competitors/peers and board members/management. However, LSHC executives in 2024, cited much higher pressure from board members/management and shareholders/investors with less pressure felt from regulators/government or employees and consumer/clients. While stakeholders/investors stepped up their pressure to act on climate change in 2024, there remains a broad -based demand for a higher level of action.
Despite these positive investment signs, only 39% of the LSHC executives reported that transforming the business model to address climate change and sustainability was central to their organisations strategy, somewhat lower than the overall average (45%). Given the vast majority of executives expect climate change to impact their company’s strategy and operations, redesigning and incorporating climate change and sustainability into business models that enable growth will become even more important.
Oganisations are implementing a range of sustainability actions with LSHC organisations leading on some but slightly behind on others
Implementing technology solutions to help achieve climate or environmental goals is critical in the race to decarbonise and reduce waste, water and energy use, CxOs cite a lack of sustainable solutions or insufficient supply of more sustainable inputs as a crucial barrier. While LSHC organisations are generally in step with overall trends, there are areas where they are either leading or lagging slightly behind in their sustainability efforts (see Figure 3).
Figure 3. Which of the following actions/adaptations has your company already undertaken as part of its sustainability efforts?
Source: Deloitte analysis of the 2024 CxO Sustainability survey (comparing responses from 396 LSHC executives with overall response). *As defined by Deloitte Global analysis.
When it comes to more challenging, needle-moving actions, there are still room for improvement with only 46% of LSHC companies developing new climate-friendly products or services, which is slightly below the overall rate of 48 per cent. Notably, 45% are tying senior leaders' compensation to environmental sustainability performance, which is higher than the overall level and both results are an improvement on 2023.
The emphasis on climate equity and ensuring a just transition in sustainability efforts is seen increasingly as critical. Fifty-seven percent of LSHC executives consider these aspects to be extremely important, slightly higher than the overall average of 55%. Most organisations are taking similar steps to integrate climate equity into their sustainability strategies (see Figure 4). While slightly more LSHC organisations are working with local communities to tackle climate change vulnerabilities and help address historic inequities as actions they are taking, compared to the overall response, LSHC organisations are slightly lagging on other initiatives.
Figure 4. How is your organisation factoring climate equity or ensuring a just transition into its sustainability efforts?
Source: Deloitte analysis of the LSHC cut of the 2024 global CxO sustainability survey.
Conclusion
Although economic and geopolitical volatility persist, climate change is a pressing issue demanding immediate action from all organisations and is reflected in a growing sense of urgency among LSHC leaders. It is encouraging to see increased investment in sustainability initiatives, a focus on technology solutions and talent acquisition. The coming years will be critical for LSHC organisations to move beyond incremental steps and embrace comprehensive strategies that embed sustainability into the very fabric of their business models.
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