Nearly half of Australian businesses are likely to reduce their spend on decarbonisation initiatives if macroeconomic conditions worsen, according to ENGIE Impact, a sustainability and decarbonisation advisory firm.

The finding is based on analysis of data from ENGIE Impact’s latest Net Zero Report titled “Aligning Corporate Vision with Decarbonisation Realities.”

The annual global report delves into corporate perspectives on decarbonisation transformation readiness, challenges to implementation and the major decarbonisation roadblocks companies must overcome to reach Net Zero.

The study surveyed more than 500 senior executives from the world’s largest companies, each employing more than 10,000 people. Australian organisations surveyed ranged in annual turnover from USD$500 million to over USD$10 billion, and included businesses in the technology, finance, retail, mining, industrial manufacturing, healthcare, real estate, and food and beverage industries.

“Reducing spending on decarbonisation initiatives could severely hinder an organisation’s ability to set itself up for the future,” said James Ramsay, Managing Director and Head of Australia, ENGIE Impact. “Now is not the time to Australian organisations to halt progress or investment. They just need to rethink how they measure the success of their decarbonisation strategy.”

Few Australian organisations see decarbonisation as a commercial imperative

When asked to list their top two choices on how their organisation thinks about its carbon reduction commitments, just 29 per cent of Australians listed decarbonisation as a commercial issue compared to 33 per cent of global peers.

Additionally, 58 per cent of Australian businesses see financial ROI as a measure of decarbonisation success versus 44 per cent globally. These responses are in line with findings from last year’s Net Zero report, which found that Australian organisations rank achieving long term cost savings as the top driver of their decarbonisation strategy and goals (44 per cent of respondents), compared to the leading response from global counterparts in which “safeguarding the future of our planet” was the leading driver (47 per cent).

And Australia, despite its reputation as “the lucky country”, is not immune to global economic headwinds.

While 67 per cent of Australian respondents believe that their organisation’s current level of investment is sufficient in commitment to carbon reduction, 48 per cent say they are likely to reduce their investment on decarbonisation activity if macroeconomic conditions worsen.

“Amid a requirement to be seen as good corporate citizens, and with the public and investors demanding change, spending less on decarbonisation in the near-term could prove detrimental to an organisation in the long-term, both from a commercial and reputational perspective,” said Ramsay.

Australian organisations down on confidence, skills and time to enact decarbonisation strategies

When asked “to what extent do you believe having a leading sustainability strategy with excellent execution will provide your company with a material competitive advantage versus your industry peers?” just 16 per cent of Australians responded “to a large extent” compared to 33 per cent of global peers.

This sentiment has declined drastically among Australian organisations within a year. When asked the same question for last year’s report, 52 per cent of Australian organisations responded “to a large extent” compared to 30 per cent of global peers.

“This is a huge drop in sentiment, but perhaps understandable when we look at the larger context,” said Ramsay. “Last year’s Net Zero report found that many Australian organisations had undertaken the quick wins required to decarbonise. Now, they’re at that next stage which can be more complex and more costly to undertake, particularly in hard to abate sectors.”

A lack of resources may also be inhibiting progress on decarbonisation strategies in Australia. When asked what the three biggest inhibitors of implementing decarbonisation initiatives at speed were within their organisations, the top responses for Australian organisations were organisational capacity/too many other priorities (42 per cent) and lack of specialist skills and internal resources (42 per cent).

These were in contrast to the world’s response (33 per cent and 29 per cent respectively, ranked 2nd and 3rd globally), which cited constraints on budget/financial investment the biggest inhibitor (34 per cent compared to Australia’s 32 per cent).

Furthermore, Australian organisations are far less confident than the rest of the world when it comes to their level of decarbonisation progress compared to their competition. When asked how they assess their progress compared to their competitors, 48 per cent responded that they’re either “far ahead” or “slightly ahead” compared to 68 per cent globally.

“If you combine all of these factors and findings, it becomes quickly apparent that Australian organisations, more than any others globally, are down on confidence when it comes to their ability to achieve climate targets,” said Ramsay. “Amid increased complexity and cost, it might be tough to see the light at the end of the tunnel. But taking a holistic approach to decarbonising an organisation, rather than relying on quick wins, is ultimately an imperative.

“There are changes many can make immediately to take that holistic approach, such as creating a portfolio of initiatives – some which have 10-year cycles, others two years – and helping the organisation, from the board down, understand the opportunity cost of not investing in decarbonisation at scale today. A full view of the path ahead, rather than a piecemeal approach to decarbonisation, is the only way to maintain confidence that the efforts being put forward are worth the investment of time and finances.”

The ENGIE Impact 2024 Net Zero Report

ENGIE Impact’s annual Net Zero Report identifies corporate decarbonisation readiness. The collective experience of the 516 organisational leaders in our 2024 Net Zero Report drills down on the most significant implementation barriers organizations are facing, and the approaches they are taking to overcome these challenges.

The report involved executives from the world’s largest companies, each employing more than 10,000 people.  To read the complete ENGIE Impact 2024 Net Zero Report, please visit: https://view.engieimpact.com/2024-net-zero-report/p/1