TheCorporateCounsel.net

Earlier this week, PwC released its latest Pulse Survey, “Focused on reinvention,” which asked 609 executives of US companies about managing risks and opportunities in the current business environment. Surprisingly, more than two-thirds of the executives surveyed indicated that they are prepared to comply with coming sustainability reporting requirements, and 66% “are actively engaging with or closely monitoring SEC regulatory activity and proposed disclosure rules.” Despite this level of readiness, the Survey notes:

The headlines in 2023 have been dominated by extreme weather events, but climate change remains relatively low on the list of business risks among respondents. Half of business executives in our survey cite it as a risk to their business. Only 19% cite it as a serious risk, down from 23% in 2022.

Companies are preparing for compliance, however. More than two-thirds of the executives (69%) say they’re prepared to comply with coming sustainability reporting requirements, and 66% are actively engaging with or closely monitoring SEC regulatory activity and proposed disclosure rules. Climate change is an extremely complex issue, but compliance is straightforward. It’s much easier for companies to adhere to externally generated guidance and requirements than it is to rethink business models and take other forward-looking steps to decarbonize.

Only 23% of executives in our survey are contingency planning for climate-related disruptions in the next 12 to 18 months. Some may already have taken steps related to climate and don’t plan to allocate more in the near term, while others may be playing catch-up. Given the 18 separate weather and climate disasters in 2022, each of which cost $1 billion in damage, it’s important for management to discuss the issue with their board and factor it into their strategy and risk management in order not to fall behind. It also presents an opportunity for companies to invest in greater resilience measures.

The Survey goes on to indicate that, within the C-suite, CHROs are the most likely to recognize the issues associated with climate change, with 62% of CHROs citing climate change as a “severe or moderate risk,” significantly more than 37% of CFOs and 50% of all respondents to the Survey. PwC notes that 35% of CHROs indicated that they are preparing contingency plans for climate-related disruptions in the next 12 to 18 months.

What are the biggest risks on the minds of these executives? The Survey notes:

Many risks remain, however. Cyber attacks present the biggest current potential risk, with 74% of executives saying this is either a moderate or serious risk. In addition, while the odds of a recession may be lower, economic growth is still likely to be uneven — at best. Nearly three-quarters (72%) point to an uncertain macroeconomic environment as a moderate or serious risk. A related risk is margin pressure (68% see it as a moderate or serious risk). Inflation is declining but remains above policymaker targets, and many companies may not have sufficient pricing power to sustain margins.

On the “glass half full” front, the Survey indicates that only 17% of business executives strongly anticipate a recession in the next six months, a drop from 35% in October 2022.

– Dave Lynn