A survey from IBM’s market research arm found nearly a third of Canadian executives are successful in executing on sustainability plans, but more than half are struggling to finance the investments.

In the poll of over 200 Canadian C-suite executives by the Institute for Business Value conducted in the second half of 2023, 31 per cent report making “significant progress” in in executing their sustainability strategy. It marks a 20 per cent increase from its previous survey released in 2023.

At the same time, 52 per cent say they are struggling to fund sustainability investments, and 62 per cent report having to make trade-offs between financial and sustainability outcomes.

The balancing act is embodied in the challenge between funding sustainability reporting and action.

“Companies are starting to prioritize their focus on reporting requirements. However, organizations are caught in the tug of war between the funding to facilitate those reporting requirements while actually focusing on driving tangible sustainability outcomes,” Zlata Huddleston, a partner and sustainability practice leader at IBM Consulting Canada, told Sustainable Biz Canada in an interview.

Despite the road bumps, most Canadian executives say pursuing sustainability makes for a better business.

Sustainability is a business win

Examples of acting on sustainability cited in the report are adhering to net-zero targets, mitigating climate risk, making an energy transition and attaining social outcomes such as an inclusive workplace.

The survey found 72 per cent of Canadian executives believe sustainability drives better business results and 74 per cent say sustainability is central to their business strategy.

There has been improvement on sustainability actions, Huddleston said. Compared to 11 per cent of companies in its last survey, almost one-third now say they have made serious development on their sustainability strategy.

She attributed this change to impending reporting requirements for corporate sustainability and the need for more data to initiate the steps.

Huddleston said embedding sustainability in business operations leads to better outcomes because:

• it widens the pool of customers to companies interested in sustainable sourcing or services;
• more employees are taking a company’s sustainability into consideration before they choose to apply for a position; and
• regulations, shareholders and board members are pressuring firms to source more sustainably and meet obligations to reduce carbon emissions and energy use.

Canadian companies are showing success with sustainability. Canadian organizations that embed sustainability are 85 per cent more likely to outperform on profitability compared to 52 per cent globally. Also, Canadian respondents rank ninth worldwide in acknowledging insufficient sustainability skills as a barrier, showing the skills gap is comparatively less concerning for Canadian leaders than the rest of the world, Huddleston said.

Hindrances still exist, however, on the sustainability journey of Canadian companies because of the changing regulations. The Canadian Sustainability Standards Board is preparing for a public consultation for sustainability disclosure standards in Canada, and the U.S. Securities and Exchange Commission approved a rule requiring some public companies to begin disclosing their greenhouse gas emissions, affecting hundreds of foreign companies.

The ‘tug of war’ on sustainability

Businesses and their executives are in a push-and-pull between funding for sustainability reporting against real outcomes, Huddleston said. Over half of Canadian executives (52 per cent) say they are struggling to fund sustainable investment and about six-in-ten report making trade-offs between financial and sustainable outcomes.

The global portion of the survey looking at 5,000 executives from 22 countries found companies are spending more on sustainability reporting than innovation by 43 per cent. It may be a sign companies recognize the need for information before taking a first step, she explained, but also the challenge of diverting enough money for meaningful action.

Solutions for the strain

If companies are struggling to get their sustainability strategy into the air, Huddleston offered three tips to start.

She recommends business leaders source accurate, detailed data and align sustainability and enterprise data strategies to establish processes for sourcing, integration, governance, and catalysts for progress. Tools like AI can “revolutionize” sustainability efforts because of the raw effectiveness in analyzing large data sets, she added.

Businesses can integrate sustainability into their processes, decisions and ways of working by developing roadmaps to drive changes in core processes.

Finally, Huddleston urges creating effective governance and an organizational structure so that decisions are made at the right levels to drive sustainability.