Coronavirus: Pandemic forces business to slow green reforms

More than half of firms plan to wind back environmental initiatives due to the ­financial impacts of the COVID-19 crisis.

Businesses are moving to secure competitive advantage by planning for the least-cost environmental transition of their operations.

More than half of Australian firms plan to wind back environmental initiatives due to the ­financial impacts of the COVID crisis despite mounting pressure from shareholders, clients and employees for businesses to ­become more sustainable.

However, a new international survey has found the proportion of Australian chief executives planning to cut their companies’ environmental performance is below the global average.

The tempering of corporate environmental ambitions will disappoint climate change activists, who have long targeted Australia’s biggest companies.

But the suspension of environmental initiatives could be temporary, with a third of top Australian firms saying they will accelerate green investments in the COVID recovery phase.

The Deloitte survey of 750 global CEOs found 54 per cent of Australian companies were being forced to downgrade sustainability initiatives during the pandemic, compared to 65 per cent of global CEO respondents.

Australian CEOs were also relatively optimistic about restarting their corporate environmental programs, with 32 per cent saying they would accelerate sustainability activities in the next 12 months, compared to 23 per cent for their international counterparts.

Deloitte Access Economics lead partner Pradeep Philip said the pandemic had forced many companies to scale back their ­environmental ambitions.

Deloitte Access Economics lead partner Pradeep Philip

But shareholder and employee activism, together with political and regulatory pressures, would drive a corporate environmental comeback, he said.

“Australia emerged well out of the two recent global crises — the GFC and the pandemic. This has given us the room to move on new challenges such as sustainability,” Dr Philip said. “But it’s also the case that as a country we have lagged the international ­debate on climate and so businesses are now accelerating their efforts to catch up and also create new markets for themselves.”

He said businesses were moving to secure competitive advantage by planning for the least-cost environmental transition of their operations.

“They see the risk posed by global action and regulators, and so are preparing themselves to mitigate the risk, but also seize the opportunities,” Dr Philip said.

Environmental activism by shareholders has soared in Australia in recent times, forcing the big banks to rethink the financing of coal and gas projects, and mining giants to recommit to the Paris climate accord and review links with the fossil-fuel lobby.

Meeting the expectations of employees has also emerged as a powerful motivator for CEOs to be seen to act sustainably. The Deloitte survey, which canvassed 75 Australian CEOs in its global sample, revealed 57 per cent of Australian respondents and 45 per cent of international corporate chiefs saw employee morale as a key driver of environmental policies. About 44 per cent of Australian CEOs surveyed, and 49 per cent of global CEOs, said their environmental performance was aimed at meeting customer expectations.

With US President Joe Biden hosting a climate summit for 40 world leaders including Prime Minister Scott Morrison in less than three weeks, the federal ­government and Australian companies will be under growing pressure to announce more ambitious targets to tackle carbon emissions.

In his invitation, Mr Biden urged leaders to use the event to outline how they would contribute to stronger climate action.

British Prime Minister Boris Johnson will also push leaders, ­including Mr Morrison, to implement a tougher emissions target ahead of the COP26 meeting in Glasgow in November.

Australian companies face a raft of new environmental regulations in Europe in coming years, including a potential carbon border tax on exports from countries without a legislated carbon price.